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Insurance vs. Self Funded Pools

1. Insurance is Risk Transfer

Pooling is Risk Assumption

2. With insurance you pay a guaranteed, fixed premium for full transfer of risk. No matter how many claims you have, you do not pay any more premium

With pooling, you pay an assessment or estimate of your share of the pool's expenses. If your losses or the losses of others exceeds the estimates, then you may be assessed for any additional amounts.

3. With insurance, you are not obligated for anything other than your quoted premium and adherence to policy conditions. If the insurance company loses money, that's their problem and the stockholders lose money.

With pooling, you are "jointly" liable for the debts of the pool, even if you did nothing to contribute to the debts. If the pool loses money, that's your problem and your local taxpayers lose money.

4. With insurance, you may shop for the best deal and change companies at will. You have no long-range obligation.

With pooling you are obligated indefinitely beyond the policy year. Even if you leave the pool, you remain indebted to the pool and sill may be assessed additional money.

5. With insurance you are purchasing a "Risk Transfer" service to protect your taxpayer's money.

With pooling you are entering into a long-term, speculative venture sharing the losses of all members of the pool using taxpayer's money as investment capital.

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