The deductible known as self-insured retention (SIR) applies to which policy component?

• A. Liability umbrella policies
• B. Workers' comp
• C. Health insurance
• D. Auto insurance

Answer: (A)

Self-insured retention is a deductible-like amount that attaches to liability umbrella or excess coverage. It represents the portion of a loss the insured must pay out of pocket before the umbrella policy responders kick in. The umbrella sits above the underlying primary liability coverages and provides extra limits, but to prevent small claims from eroding those higher limits, the policy requires the insured to absorb the SIR first.

For example, if the SIR is set at a sum and a covered loss occurs, the insured pays up to that SIR amount, then the underlying primary policy pays its share up to its limits, and the umbrella layer pays the remaining amount up to its own limit, in line with the policy terms. This structure is characteristic of liability umbrella/excess coverage, not typically used with health insurance, workers’ compensation, or standard auto coverage, which have different deductible or cost-sharing mechanisms.