Which deposit is NOT an acceptable form to secure incurred liabilities for self-insurance?

• A. Credit Card
• B. Cash
• C. Securities
• D. Irrevocable letters of credit

Answer: (A)

When a self‑insurance plan requires collateral for incurred liabilities, the collateral must be ready and reliable enough to pay claims without delay. Cash provides immediate availability. Marketable securities can be liquidated quickly to raise funds. An irrevocable letter of credit is a bank-guaranteed promise to pay up to a set amount if the insured fails to meet obligations, giving a strong, enforceable assurance of funds.

A credit card, however, is a revolving line of credit rather than pledged funds or a guaranteed payoff. It depends on the lender’s ongoing willingness to extend credit and can be canceled, reduced, or limited, which means it does not constitute readily available, guaranteed collateral to secure liabilities. Therefore, it is not an acceptable form to secure incurred liabilities for self‑insurance.