self-insured retention (SIR)
A dollar amount specified in an insurance policy (usually a liability insurance
policy) that must be paid by the insured before the insurance policy will respond
to a loss. SIRs typically apply to both the amount of the loss and related costs,
e.g., defense costs, but some apply only to amounts payable in damages, e.g.,
settlements, awards, and judgments. An SIR differs from a true deductible in
at least two important ways. Most importantly, a liability policy's limit stacks
on top of an SIR while the amount of a liability insurance deductible is subtracted
from the policy's limit. As contrasted with its responsibility under a deductible,
the insurer is not obligated to pay the SIR amount and then seek reimbursement
from the insured; the insured pays the SIR directly to the claimant. While these
are the theoretical differences between SIRs and deductibles, they are not well
understood, and the actual policy provisions should be reviewed to ascertain
the actual operation of specific provisions. See also
Deductible.
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CLI XI.C;
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RF IV.B