USX, a steel subcontractor, promised to self-insure instead of buying traditional insurance and naming the general contractor as an additional insured. The Illinois court ruled that self-insurance is just a private promise to pay for losses, not actual insurance. This means a subcontractor's self-insurance promise cannot replace the insurance requirements in a contract—the general contractor loses the protection of being named on a real insurance policy.
Never offer self-insurance as a substitute for traditional insurance policies. Courts will not enforce it as a valid insurance arrangement.
If you want to self-insure, get it approved in writing before signing the contract and understand you're making a personal indemnity promise, not providing insurance coverage.