Self-insurance is a risk-management approach in which a host chooses to retain some or all of a risk rather than transferring it to an insurer, covering any resulting losses out of pocket. It is often implemented by setting aside a dedicated reserve fund so money is available when damage, repairs, or claims arise. Hosts may self-insure smaller or predictable risks, such as minor guest damage, while purchasing insurance for catastrophic exposures like fire or major liability. The main appeal is avoiding premium costs, but the trade-off is bearing the full financial impact of any loss that is retained. Because retaining large or liability-related risks can be financially dangerous, hosts should weigh self-insurance carefully and discuss the balance with a licensed insurance agent.
Why this matters for property managers
Retaining risk rather than transferring it can lower ongoing cost, but it concentrates the full weight of a large loss on the operator's own reserves. A single fire, lawsuit, or catastrophic claim can dwarf years of premium savings if the fund is not deep enough to absorb it. Because the stakes scale with portfolio value, deciding how much risk to keep is a question to weigh carefully with a qualified advisor rather than by default.
Frequently Asked Questions
Is self-insurance the same as having no insurance?
How do hosts typically self-insure?
What are the risks of self-insuring?
Can a security deposit be a form of self-insurance?
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