Which option best describes a characteristic of self-insurance?

Self-insurance is a risk management strategy where individuals or businesses set aside their own funds to cover potential losses instead of transferring the risk to an insurance company. By reserving funds specifically for this purpose, self-insurers can manage their own risk exposure while retaining control over their financial resources. This approach allows them to avoid the premiums associated with traditional insurance policies and can be beneficial for those with sufficient financial capacity to absorb losses.

The other choices refer to aspects of traditional insurance models. Purchasing insurance from an external company, having claims paid directly by an insurance company, and legal requirements for businesses do not align with the principles of self-insurance, which emphasizes internal risk management and financial management over reliance on external insurers.