Is self-insurance ever a good idea?

Insurance premiums may be falling, but prices are still higher than a few years ago. If you're feeling the squeeze, you might be tempted to cancel a policy and pay for costs yourself.

That’s a calculation I made with my 13-year-old cat, Nigel. When he needed surgery last year, the vet bill came to around £3,000. Instead of claiming on insurance, I paid from savings. For now, self-insuring has worked – but it is still a gamble.

In some cases, ditching cover and building your own savings pot can make financial sense. In others, it could leave you seriously out of pocket. Here’s what to weigh up before cancelling a policy.

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Why more people are reconsidering cover 

The cost of many types of cover has rocketed over the past few years, with inflationary pressures sending premiums through the roof for some insurance policies. Although prices are now starting to ease, they remain significantly higher than they were at the start of 2023. 

The high cost of cover has led many customers to review current protection. The Financial Conduct Authority's latest Financial Lives survey found 12% of adults cancelled a policy, reduced their level of cover, or chose not to buy a policy in the past 12 months to save money or because they couldn't afford the premiums.

Some ex-policyholders are turning to self-insurance as an alternative. This involves making regular deposits into a dedicated savings pot, and using this to pay for incidents they'd have otherwise made insurance claims for. 

• Find out more: our experts explain what's happening to car and home insurance premiums 

Should you self insure instead?

While it may be tempting to strike premiums from your outgoings, self-insurance can be a gamble. For most types of insurance, you probably won't need to claim very often – if at all. But without any protection, you're making a bet you might not be able to afford to lose.

The best way to decide whether self-insurance could work for you, is to consider these points: 

• Is it a legal or compulsory requirement? Some cover isn’t optional. If you drive on UK roads, you must have at least third-party motor insurance by law. Home insurance isn’t a legal requirement, but your mortgage lender might make buildings insurance a condition of the loan. Travel insurance isn’t usually compulsory, although some countries may require it as a condition of entry. 
• Can you pay the bill? Think about whether you could comfortably afford – and would be prepared – to repair or replace valuable items using your readily available funds.
• How much will you need to save? Work out how much you might actually need saved to cover the costs. The price of repairs or vet fees aren't set in stone either, so also keep an eye on how expenses for worst-case scenarios have changed.
• Where will you stash the cash? Keep your emergency money in high-interest savings account, ringfenced from other savings and keep topping it up. Consider an easy-access or a regular savings account that allows you to get at your cash quickly. Take a look at our guide to finding the best savings account for helpful tips and advice.
• Could you go part way? You might be able to lower your insurance costs without giving up cover altogether. For instance, you could choose to self-insure to some extent by increasing your excess to the highest amount you would comfortably be able to pay yourself if you needed to make a claim. 

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How self-insuring works in practice

Nigel is 13 and has used up a few of his nine lives. Since I adopted him in 2021, he’s had the occasional scrap with the neighbour’s cat, but the most serious issue came in autumn 2024 when he developed severe glaucoma and had to have his right eye removed.

The total cost of appointments, surgery and medication came to around £3,000. It was a shock at the time, but I paid from savings rather than claiming on insurance.

When I compared quotes, the cheapest lifetime policy I found would have cost £172.20 a year. Over five years, that would have added up to £861 in premiums. However, the policy also had an excess of £249 per condition per year and a 20% co-payment, meaning a substantial share of the £3,000 bill would still have come from my own pocket.

Nigel is otherwise in good health and we haven’t had any other major scares recently. For now, self-insuring has broadly worked for me. But it remains a gamble – if he develops further serious conditions, the numbers could quickly shift.

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5 costs you could 'self-insure'

Here are five unexpected costs and expenses you could cover yourself either in full or partially:

1. Pet care

A third of pet owners do not have insurance, according to Tesco Pet Insurance. Premiums can be particularly high for older animals or certain breeds, which is why some owners choose to set money aside instead.

The risk is timing. If your pet needs expensive treatment before you have built up enough savings, you could face a bill running into thousands. Like buying insurance, self-insuring works best if you start when your pet is young and healthy.

Dog owners should also remember that insurance often includes public liability cover. Without it, you could be personally liable if your dog injures someone or causes damage, such as triggering a car accident.

• Find out more: best pet insurance 2026

2. Private healthcare

NHS waiting times have prompted more people to consider private diagnosis and treatment.

The cost of private medical insurance will depend on the level of cover and your personal circumstances, such as your age, medical history and where you live. Our research into PMI costs found that a 55-year-old living in the Midlands could pay more than £200 a month for comprehensive cover. That rises to more than £300 if you are over 65.

Instead, you could use savings to cover all or part of your medical costs. A private GP appointment may cost between £40 and £90, but treatment for more serious issues can be far more expensive. A hip or knee replacement, for example, can cost more than £10,000 each.

If all you want is an expert or second opinion, one option is to pay for a private consultation yourself, then if necessary ask your consultant to refer you back into the NHS for treatment.

Paying directly can also offer more flexibility than health insurance, which may restrict your choice of clinics, consultants and treatments.

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3. Gadget and mobile phones

Unless you value the peace of mind mobile phone insurance offers, the likelihood of needing to claim – and what you would stand to lose without it – may mean you could manage without cover, especially if you have emergency savings to pay for repairs or replacements.

If you have personal possessions cover as an add-on to your contents insurance, you may already be protected against loss, damage or theft. It’s worth checking your existing policy before paying for standalone gadget insurance.

• Find out more: mobile phone insurance: how to get the best cover

4. Breakdown assistance

The cheapest breakdown policies start from as little as £15 per year, while the most expensive can be well over £100.

But if you’ve got a fairly new car that’s so far provided trouble-free motoring, you may decide to forgo breakdown cover altogether and fork out for any emergency assistance yourself.

You can call for help through a pay-on-use service. Providers that offer this include LV Britannia Rescue, Start Rescue and GEM among others.

If you choose to self-insure, make sure you factor in the possible costs. The most basic level of assistance will set you back at least £100, and costs can quickly rack up if you need extra services such as towing. 

• Find out more: best and worst car breakdown cover providers 2026

5. Boiler breakdowns and home emergency

If your boiler breaks down, your provider will send an engineer to assess the problem and try to fix it. Policies also usually include a free annual service. 

We found it's rarely a cost-effective option. Our latest survey found people paid an average of £183 a year for a boiler cover package and that usually adds up to more than paying for an annual service and repairs when needed. 

You might also want to skip home emergency insurance. This is usually offered as an add-on to your main home insurance policy and covers the costs of an initial call-out and repairs if there is an unexpected incident such as a burst pipe or power failure.

 It won’t, however, pay to fix the root cause of the issue. For that, you may be able to claim on your buildings insurance or contents insurance, depending on what’s been damaged. 

A policy with no call-out fee costs around £150 a year and while it may offer peace of mind, you could definitely do without it.

• Find out more: how to choose the best boiler cover