EXCAVATION INSURANCE GROUP
What’s a Self-Insured Retention?
Excavation Insurance Group explains what a self-insured retention is, how it differs from a deductible, and where it typically shows up on an excess or umbrella program.
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Quick answer: A self-insured retention, or SIR, is a dollar amount you pay out of pocket on a claim before your policy starts paying, sitting at the bottom of a specific coverage rather than being reimbursed by an insurer the way a deductible sometimes is. IRMI defines an SIR as a dollar amount specified in a liability policy that the insured has to pay before the policy responds. Excavation Insurance Group most often sees this show up on umbrella policies that offer broader coverage than the underlying GL, if the umbrella has to respond to a gap the underlying policy doesn’t reach, the SIR is what you pay first.
SIR VS DEDUCTIBLE: NOT THE SAME THING
The two get confused constantly, and the distinction matters. With a standard deductible, the insurer typically pays the full claim and then bills you back for the deductible amount, or nets it out of the payment. With an SIR, you’re generally responsible for handling and paying that portion of the claim yourself, including a share of defense costs in some structures, before the policy’s obligation kicks in at all. An SIR puts more of the early claim-handling burden directly on the contractor than a deductible does.
WHERE IT SHOWS UP ON AN EXCESS OR UMBRELLA PROGRAM
A following-form excess policy, the structure most excavation contractors should default to, usually doesn’t carry its own separate SIR, it simply activates once the underlying policy’s limit is exhausted. Where an SIR is more likely to appear is on the broader-coverage side of a true umbrella policy, specifically when the umbrella is being asked to respond to a claim that falls outside what the underlying policy covers at all. In that scenario, the SIR functions like a mini-deductible sitting under that specific piece of broadened coverage. Knowing whether your umbrella carries an SIR, and how large it is, is exactly the kind of detail that should get flagged during a coverage review, not discovered mid-claim.
Back to the Excess and Umbrella Insurance for Excavation Contractors hub. Related: Does Excess Coverage Cover Legal Defense Costs? and Does Umbrella Coverage Apply to Every Underlying Policy?
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