Self-Insured Retention

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

Deductible

Excess Policy

Related terms

Deductible

Policy Limits

Duty to Defend

Excess Policy

Litigation Guidelines

Claims Handling

Reserves

Declarations Page

Frequently asked questions

How is an SIR different from a deductible?

With a deductible the insurer usually pays and then seeks reimbursement, and it typically controls the defense from the outset. With an SIR the insured pays and often controls the defense until the retention is exhausted.

Can someone else's payment exhaust an SIR?

Courts are split. Some require payment by the named insured itself, while others allow exhaustion by any source, so the policy wording and governing state law both need to be checked.