03.06. Liability Deductibles and Self-Insured Retentions

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  1. Self-insured retention (SIR)
    • a dollar amount specified in an insurance policy that the insured must pay before the insurer will make any payment for a claim
    • sometimes used in place of deductible in liability policies (since deductible isn't commonly used)
  2. Reasons for limited use of liability deductible
    • control of claims: insured may not report seemingly minor incidents until the situation escalates
    • little reduction in premium: liability losses tend to be larger; deductible doesn't apply to defense cost anyways
    • recovery from the insured
    • specialty liability policies: more common for those (risk control)
  3. Deductible vs SIR
    • deductible pays first-dollar (incl defense cost) and then recovers
    • full policy limit is payable on top of SIR
    • SIR usually require very strict reporting of potential large claims
    • SIR often paired with drop-down umbrella
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03.06. Liability Deductibles and Self-Insured Retentions

Liability Deductibles and Self-Insured Retentions
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