Self-Insured Retention (SIR)

A self-insured retention (SIR) is the amount you must pay first-dollar, out of your own funds, before a liability policy responds to a loss. Crucially, an SIR is a condition precedent to coverage: the carrier generally has no duty to pay or defend until the SIR is exhausted, and within the retention the insured usually arranges and pays for its own claim handling and defense.

That is what separates an SIR from a deductible. With a deductible, the insurer typically pays the claim, controls the defense, then bills the insured back. With an SIR, the insured pays and administers losses first, and only the coverage above the retention is the carrier's obligation — which is why SIRs usually require no collateral.

SIRs are most common on larger or higher-risk accounts (trucking fleets, contractors, habitational) that accept more risk in exchange for lower premium — the higher the SIR, the lower the premium. They must be disclosed on certificates of insurance, and upstream parties often scrutinize them because they affect who pays first-dollar losses. The SIR sits below your per-occurrence limit.