What are the differences between a self-funded and an insured disability plan?
Self-funded plans have several advantages over insured disability plans. One of the main advantages is the flexibility of the Plan design. By creating an ERISA program, you can design the plan to meet your needs. Insured plans are state regulated and must conform to standard existing Plan designs. Employers can experience greater cash flow savings through flexible funding options and control of short-term cash flow. A self-funded plan also allows employers to earn investment returns on funds set aside to cover annual claims. Funds spent on insurance premiums usually have no investment return. Insurance is not risk free — increased costs are eventually passed on through premium taxes or additional overhead built into premiums. Administration costs are generally lower in self-funded plans because you pay actual fees as you go rather than an estimated fee based on the potential duration.
