Deductibles vs Self-Insured Retention (SIR)

By Gaurav Chhokar

Uploaded on July 21, 2019

Different between deductibles and SIR (Self Insured retention)

Both Deductibles and SIR are the amount of loss which is paid by insured and both are kept to down the premium. But these two have slight differences. Let’s read what those are

1. Payment

In deductibles policy, Insurer pay loss amount after deduct the deductible amount or pay full amount of loss and recover deductible amount later. Where in SIR policy, Insured require to make payment first then insurer begins to pay

2. Limit of Insurance

Deductible reduce the limit of the insurance on other hand SIR don't. Let's understand it by example-Suppose that you have deductible policy wherein your limit is $1,000,000 and $50,000 deductibles. In that case, insurer will provide coverage of $950,000 only because deductible amount is part of limit of insurance in deductible policy. Where in SIR policy, suppose that you have limit of $1,000,000 and SIR is $60,000 in this case insurer will pay full $1,000,000 coverage once insured paid SIR $60,000.

3. Cost of Defending the Claim

In SIR, All expenses related to defend the claim are paid by insured until and unless defending cost exceed SIR amount. Support you have SIR limit $50,000 and you experience loss of $30,000 and $15,000 defending of claim so you have to pay $45,000 from you own pocket. In deductible policy, all expenses related to defend the claim are paid by insurance company.

4. Burden of Payment

In deductible policy, it puts immediate burden of payment on insurer in case of third party claim when in SIR, it doesn't