What is the primary purpose of self-insurance?

The primary purpose of self-insurance is to retain risk by setting aside funds for unexpected losses. Self-insurance is a risk management strategy in which an individual or organization chooses to pay for their own losses instead of transferring that risk to an insurance company. This approach involves budgeting and reserving money to cover potential claims or losses that may arise, thus allowing the entity to manage its own risks effectively.

With self-insurance, the focus is on preparing financially for the possibility of losses, providing greater control over risk management and potentially reducing costs associated with purchasing insurance policies. This is particularly useful for businesses that may have predictable loss patterns and want to avoid the premiums associated with traditional insurance.

The other options reflect different aspects of insurance and risk management, but they do not align with the core concept of self-insurance as a strategy for retaining risk rather than transferring it or eliminating risk entirely.