Would Self-Insuring be a Good Option for Your School District?
The Terrebonne public school officials in Louisiana are considering such an option. According to www.dailycomet.com, "Unhappy with rising costs, Terrebonne public school officials are exploring the possibility of self-insuring the system’s buildings. The board now pays private insurance companies to cover the cost of damage to school property.
With a self-insured plan, the board would put aside money each year and build a reserve to pay for building repairs resulting from disasters. Such a plan comes with potential benefits as well as risks. The board would save the money it would spend on yearly insurance premiums. But if buildings suffer more damage than the board has in its reserve account, it could lack enough to pay for repairs or be forced to ask local taxpayers for more money to get the work done.
The school system has about $301 million worth of buildings and contents insured now, including 40 schools across the parish. The issue arose June 16, when the board renewed its property-insurance policy through USI, a New York-based broker. The insurance covers $10 million in damage from named storms and $50 million from other causes, such as fires, tornadoes or hail. The plan costs taxpayers more than $1 million annually, with additional fees for each disaster that results in claims."
Lets see. Pay $1 million to transfer the risk of a potential $301 million loss. Seems like a deal to me. How much money was paid out in claims in the previous five years? Without knowing the details, as an insurance advisor, this does not seem to be the wise choice.