Self-Insured Retention (SIR)

A self-insured retention (SIR) is the amount a firm must satisfy itself before insurance responds, according to the policy's terms.

Definition

A self-insured retention, or SIR, sets an amount the insured firm must pay or handle before the insurer's coverage duties begin. The policy defines what counts toward it, how it applies to a claim, and whether the firm must arrange or fund a defense during that period. Those details can differ from a deductible, where an insurer may handle a claim and later seek reimbursement or reduce its payment. Owners should look at the SIR together with claim reporting rules, defense provisions, payment timing, and available cash. Firms may track retained claim costs by policy and claim, but their accounting treatment depends on the facts and internal policy. An SIR is not the same as a premium, and it does not itself state the maximum the insurer may pay. The contract wording determines how the retention works.

How owners use it

• Plan for funds and internal claim-handling responsibilities before a policy responds.
• Review defense obligations and payment mechanics alongside the stated retention amount.
• For a $25,000 SIR and $40,000 of eligible costs, $40,000 - $25,000 = $15,000 is above the retention, subject to policy terms and limits.
• Compare the SIR with the deductible and coverage limit when reviewing insurance arrangements.

Related terms

• DeductibleAn amount the insured must pay or absorb before an insurer pays covered amounts, as defined by the policy.
• Coverage LimitThe maximum amount an insurer may pay under a policy or coverage part, subject to terms, deductibles, aggregates, and other
• Claims-Made PolicyAn insurance policy that generally responds when a claim is first made against the insured and reported as required during
• Professional Liability InsuranceCoverage designed to respond to claims alleging errors, omissions, or negligent professional services, subject to the policy's terms, exclusions, limits,

Related guides and articles

• What is professional liability insurance for an engineering firm?Professional liability insurance, also called errors and omissions coverage, may respond to certain claims alleging that professional services caused financial loss, subject to the policy’s wording,
• What should engineering firms know about claims-made coverage?A claims-made policy generally responds when a claim is first made against the firm and reported to the insurer within the policy’s required timeframes.