Self-insurance is best described as?

• A. A Hold Harmless Agreement
• B. A policy purchased from an insurer
• C. Unaware retention strategy
• D. Planned and funded retention thought out with strategy

Answer: (D)

Self-insurance means deliberately retaining risk and funding potential losses from internal resources rather than paying premiums to an insurer. It’s a planned, funded approach: the organization evaluates its risk, sets aside reserves or uses internal funding mechanisms (like self-insured retentions or captives), and aligns the retention with a broader risk-management strategy. The emphasis is on strategic planning and financial preparedness to absorb losses, rather than transferring risk or leaving it to chance.

This matches the described idea of planned and funded retention thought out with strategy. A hold harmless agreement is a contractual shift of risk, not a funded retention. A policy purchased from an insurer transfers risk. An unaware retention implies no planning, which isn’t true of self-insurance.