Insurance Defense and Coverage
Policy Anatomy
A self-insured retention requires the policyholder to fund losses up to a stated amount before coverage attaches. Unlike a deductible, where the insurer typically pays the claim and seeks reimbursement, an SIR generally obligates the insured to handle and pay claims within the retention itself.
Many SIR provisions make satisfaction of the retention a condition precedent to the insurer's duty to defend, meaning the insured controls and funds the defense until the retention is exhausted.
Alternative Names:
SIR, Retention
Why it Matters?
Whether the insured or the carrier controls the defense within the retention determines counsel selection, litigation strategy, and reporting obligations. Disputes commonly arise over whether payments by others, such as a parent company or another insurer, can erode the retention, and over whether the insured's failure to fund it excuses the carrier entirely.
Frequently Confused with
Related terms
Frequently asked questions
How is an SIR different from a deductible?
Can someone else's payment exhaust an SIR?
