When it comes to large or complex insurance policies, such as commercial liability or professional indemnity insurance , a Self-Insured Retention (SIR) may come into play. While it may sound similar to a deductible, an SIR involves different terms and responsibilities that policyholders need to understand. At Riseson Insurance , we’re committed to helping our clients in Tempe , Phoenix , Scottsdale , Tucson , Gilbert , and Chandler navigate the complexities of their insurance coverage, including SIRs.

Self-Insured Retention (SIR) refers to the amount of financial responsibility the policyholder must absorb before the insurance coverage kicks in. Unlike a traditional deductible, which is deducted from a claim payout, the SIR must be paid directly by the insured party before the insurance company will cover any remaining costs.

SIRs are typically found in liability insurance policies and apply to larger businesses or individuals who require specialized coverage.

Here’s how a Self-Insured Retention operates in practice:

Initial Responsibility: The policyholder must pay the SIR amount out-of-pocket when a claim is made. Claim Filing: Once the SIR is met, the insurance policy will cover the remaining costs up to the policy limits. No Coverage Until Met: The insurance company will not contribute to any claim until the SIR amount has been paid by the insured. Multiple Claims: If multiple claims are made during the policy period , the insured may need to pay the SIR for each separate claim, depending on the terms.

While both a Self-Insured Retention and a deductible involve out-of-pocket expenses before coverage kicks in, there are distinct differences:

Deductible : The insurance company generally manages the claim process and subtracts the deductible amount from the payout. SIR: The insured is responsible for paying the SIR before the insurance company takes over, and the insured typically manages the claim process until the SIR is satisfied.

Self-Insured Retention is more commonly seen in larger commercial policies for several reasons:

Cost Savings: By opting for a higher SIR, businesses may be able to reduce their insurance premiums , as they are taking on more financial risk. Customized Coverage: Larger businesses may have specific needs and want to maintain more control over the claims process. Risk Management : Businesses that are more risk-conscious and have the financial ability to absorb costs may opt for an SIR to tailor their insurance to their risk profile.

Let’s say your business has a liability insurance policy with a $50,000 SIR. If you are sued for a covered claim:

You must pay the first $50,000 of legal fees, settlements, or damages out-of-pocket. After you’ve paid the SIR amount, your insurance policy will cover the remaining costs up to the policy limit. If a second claim is filed, you may need to pay another $50,000 SIR, depending on the terms of the policy.

Advantages:

Lower Premiums: A higher SIR often results in reduced insurance premiums, making it an attractive option for businesses with solid risk management strategies. Control Over Claims: You manage the claim process up until the SIR amount is paid, giving you more control over how claims are handled. Risk-Sharing: SIR allows businesses to assume more responsibility for their risks, which can be a part of a broader strategy to reduce overall risk exposure.

Disadvantages:

Higher Out-of-Pocket Costs: The need to pay the SIR upfront can be a financial burden, especially for smaller businesses or those without significant reserves. Complexity: SIR policies are more complicated to manage, and businesses may need to allocate more resources to handling claims. Multiple Claims: If multiple claims occur, the insured may have to pay the SIR for each individual claim, leading to additional costs.

SIR is most beneficial for businesses or individuals who have:

A strong financial foundation to absorb potential claim costs. The ability to manage and mitigate risks effectively. A preference for lower premiums over a higher immediate cost burden.

Understanding Self-Insured Retention can be challenging, but Riseson Insurance is here to guide you through the process. Whether you're based in Tempe, Phoenix, Scottsdale, Tucson, Gilbert, or Chandler, we’ll ensure that your coverage matches your business needs.

Contact Riseson Insurance at 602-460-5470 to discuss how Self-Insured Retention can fit into your insurance plan. Let us help you make informed decisions to protect your assets with confidence!

What is Self-Insured Retention (SIR)?

How Does SIR Work?

SIR vs. Deductible: Key Differences

Why Would a Business Choose SIR?

Example of How SIR Works in Real Life

Advantages and Disadvantages of SIR

When Should You Consider an SIR?

Contact Us for Your SIR Insurance Needs

1. Initial Responsibility: The policyholder must pay the SIR amount out-of-pocket when a claim is made.
2. Claim Filing: Once the SIR is met, the insurance policy will cover the remaining costs up to the policy limits.
3. No Coverage Until Met: The insurance company will not contribute to any claim until the SIR amount has been paid by the insured.
4. Multiple Claims: If multiple claims are made during the policy period , the insured may need to pay the SIR for each separate claim, depending on the terms.

• Deductible : The insurance company generally manages the claim process and subtracts the deductible amount from the payout.
• SIR: The insured is responsible for paying the SIR before the insurance company takes over, and the insured typically manages the claim process until the SIR is satisfied.

1. Cost Savings: By opting for a higher SIR, businesses may be able to reduce their insurance premiums , as they are taking on more financial risk.
2. Customized Coverage: Larger businesses may have specific needs and want to maintain more control over the claims process.
3. Risk Management : Businesses that are more risk-conscious and have the financial ability to absorb costs may opt for an SIR to tailor their insurance to their risk profile.

1. You must pay the first $50,000 of legal fees, settlements, or damages out-of-pocket.
2. After you’ve paid the SIR amount, your insurance policy will cover the remaining costs up to the policy limit.
3. If a second claim is filed, you may need to pay another $50,000 SIR, depending on the terms of the policy.

• Lower Premiums: A higher SIR often results in reduced insurance premiums, making it an attractive option for businesses with solid risk management strategies.
• Control Over Claims: You manage the claim process up until the SIR amount is paid, giving you more control over how claims are handled.
• Risk-Sharing: SIR allows businesses to assume more responsibility for their risks, which can be a part of a broader strategy to reduce overall risk exposure.

• Higher Out-of-Pocket Costs: The need to pay the SIR upfront can be a financial burden, especially for smaller businesses or those without significant reserves.
• Complexity: SIR policies are more complicated to manage, and businesses may need to allocate more resources to handling claims.
• Multiple Claims: If multiple claims occur, the insured may have to pay the SIR for each individual claim, leading to additional costs.

• A strong financial foundation to absorb potential claim costs.
• The ability to manage and mitigate risks effectively.
• A preference for lower premiums over a higher immediate cost burden.