Glossary

Self-insured retention (SIR)

The amount of a loss the insured must pay itself, often including defense costs, before the insurer's liability policy begins to pay.

Also called: SIR, self insured retention, retained limit

A self-insured retention is a layer of loss the policyholder pays from its own funds before the insurer owes anything. It resembles a deductible, but the mechanics differ. With a deductible, the insurer usually handles the claim from the first dollar, pays, and bills the insured. With an SIR, the insured pays its layer directly and generally controls the investigation and defense until the SIR is used up. The insurer's limit then sits above it. The policy wording decides whether defense costs count toward the SIR and who must pay it; some forms require the named insured itself to pay, not another insurer.

Say a policy has a $5 million limit and a $250,000 SIR. A $1 million loss leaves the insured paying the first $250,000. The insurer pays $750,000, and $4.25 million of the limit remains. ISO's deductible endorsement for the CGL is CG 03 00; SIRs are normally set by manuscript or carrier-specific endorsements, so read the wording.

SIRs are common in umbrella and excess liability, D&O and professional liability programs. The pitfalls are late notice and credit. The insured should still notify the insurer of a claim that might exceed the SIR, and if the insured cannot fund its layer, the insurer's obligation may never attach.

The guide on deductibles vs self-insured retentions: who pays first compares the two structures, and the deductible and retention break-even calculator tests the trade-off. See retention for the broader strategy.

Last reviewed October 10, 2026

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Related terms

Deductible The amount of a covered loss the policyholder bears before the insurer pays, set in the policy and subtracted from the loss. Retention The share of a loss a business pays itself, through a deductible, self-insured retention or captive, before insurance responds. Large deductible program A policy where the insurer pays claims and then bills you for losses up to a high per-claim deductible, in return for lower premium and secured collateral. Attachment point The loss amount at which an excess, umbrella or reinsurance layer starts paying, normally the top of the underlying limits or retention beneath it. Captive insurance company A licensed insurer owned by the business or group it insures, formed to underwrite their own risks rather than buying all coverage from outside insurers.

Related guides

Commercial umbrella insurance How a commercial umbrella adds liability limits above your CGL, auto and employers' liability, when it drops down, what it excludes, and how to size it. D&O Sides A, B and C explained Side A covers directors personally, Side B reimburses the company for indemnifying them, Side C covers the entity. How each part pays, with a worked example. Deductibles vs self-insured retentions: who pays first A deductible is billed back after the insurer pays; a self-insured retention is paid by you first. How each affects claim control, limits and credit risk. Defense costs inside vs outside policy limits: why it matters Whether legal fees erode your liability limit changes what a policy is worth. Which forms pay defense on top, which erode the limit, and what to ask first. Fleet insurance: how fleets are defined, rated and insured Fleet insurance is commercial auto for businesses with several vehicles. How fleets are classified and rated, and how to structure limits and deductibles. How to compare business insurance quotes line by line Compare commercial quotes on equal terms: limits, deductibles, valuation, forms, exclusions, defense costs, audit basis, fees and the insurer behind each.

Related insurers

Ascot Group Bermuda specialty insurer majority-owned by CPP Investments; its U.S. arm writes E&S and excess casualty, professional lines, surety, marine and comp. Tokio Marine Japan's Tokio Marine owns Philadelphia Insurance, Tokio Marine HCC and Safety National: niche package, specialty lines and excess workers' comp. Vantage Risk Bermuda specialty (re)insurer founded in 2020 that writes U.S. excess casualty, construction, healthcare and large property; owned by Howard Hughes since 2026.

Related tools

Deductible and retention break-even calculator Compares two deductible or retention options by expected annual cost, finds the claim frequency where they cost the same, and shows what a bad year would cost. Business insurance quote comparison worksheet Enter up to four quotes and see total cost, the lowest limits, highest deductibles, missing coverages, surplus lines insurers, weak ratings and exclusions.

Related en español

Seguro paraguas comercial (commercial umbrella) Cómo un paraguas comercial suma límites sobre su CGL, auto y responsabilidad patronal, cuándo baja a primario, qué excluye y cómo dimensionarlo.