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Self-Insured Retention Vs. A Deductible

Self-Insured Retention

Self-Insured Retention – What It Is & Isn’t

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What Is A Self- Insured Retention?

Self-insured retention (SIR) is defined as a dollar amount specified in a liability insurance policy that must be paid by the insured before the insurance policy will respond to a loss. Thus, under a policy written with a self-insured retention provision, the insured (rather than the insurer) would pay defense and/or indemnity costs associated with a claim until the self-insured retention limit was reached. After that point, the insurer would make any additional payments for defense and indemnity that were covered by the policy.

A Self-Insured Retention Vs. A Deductible

In contrast, under a policy written with a deductible provision, the insurer would pay the defense and indemnity costs associated with a claim on the insured’s behalf and then seek reimbursement of the deductible payment from the insured.

For example, assume that two policies are identical, except for the fact that Policy A is written with a $25,000 deductible, while Policy B contains a $25,000 self-insured retention. Also assume that defense and indemnity payments for a given claim total $100,000. In the event of a claim under Policy A, the insurer would pay the $100,000 in defense and indemnity costs that were incurred. After the claim is concluded, the insurer will bill the insured for the $25,000 in payments made on the insured’s behalf. In the event of a claim under Policy B, the insured will pay the first $25,000 of defense/indemnity costs, after which, the insurer will make the additional $75,000 in defense and indemnity payments on the insured’s behalf.

See also deductible.

ALIGNED can provide your with more information about how a self insured retention (SIR) works as well as how it differs from a deductible.

An ALIGNED Advocate can provide expert guidance about insurance and risk management best practices for your organization. Talk to one of our advocates today about how we can help you secure the best products, services and insurance solutions for your business.

About ALIGNED

ALIGNED specializes in delivering insurance and risk management solutions exclusively to Canadian businesses. Through our 18 points of differentiation and expertise, we deliver unmatched value to our growing portfolio of clients from all industries that range from small to large organizations. We offer all of the following management liability products:

For An Insurance Overview And/Or More Information On Insurance Speak To An ALIGNED Insurance Advocate Or Connect With Us Today At www.alignedinsuranceinc.com 

ALIGNED Across Canada   100% Canadian owned, ALIGNED is a premiere insurance brokerage that serves more than 1,400 clients across the country. ALIGNED’s offices in Toronto, Calgary and Vancouver are supported by a national operations centre in Cambridge, Ontario. Uniquely within the industry, ALIGNED creates, negotiates and delivers the best business insurance and risk management strategies/solutions to organizations like yours.

 

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