How Can School Districts Finance Unavoidable Risks?
Purchasing insurance is the most common type of risk transfer. Districts also may transfer or assume risks in contracts and other agreements. Contracts should be carefully reviewed; Johnston (1993) cites an example in which proper wording in a transportation contract protected a district from $1 million in claims after a fatal bus accident. Clear rules governing use of school facilities should be part of any community-use agreement, and user groups should be required to provide insurance unless the district is willing to assume liability (Morley 1990). The insurance deductible, a set portion of a loss a district agrees to pay in return for a premium reduction, is one form of risk retention. Another is self-insurance. Self-insuring can save districts money and increase budgetary stability by avoiding cyclic fluctuations in the commercial insurance market, but it demands considerable expertise and long-term planning. Small districts may combine resources in insurance pools to self-insure
