What is the difference between SIR and deductible?

Asked by: Ulises Harvey  |  Last update: February 11, 2022
Score: 4.9/5 (74 votes)

With a deductible policy, the insurer pays for losses and then collects reimbursement from you afterward up to the amount of the deductible. With an SIR in place, you're required to make payments first and the insurer only begins to make payments once the SIR is satisfied.

Is a Sir the same as a deductible?

Under an SIR, the excess insurer generally has nothing to do with losses that do not penetrate its attachment point. ... Under a deductible, however, the insurer pays every loss (up to the maximum limit of liability) and is then reimbursed by the insured up to the amount of the deductible.

What is an sir insurance?

Self-Insured Retention (SIR) — a dollar amount specified in a liability insurance policy that must be paid by the insured before the insurance policy will respond to a loss. ... In the event of a claim under Policy A, the insurer would pay the $100,000 in defense and indemnity costs that were incurred.

Is a self-insured retention the same as a deductible?

The answer to the question what's the difference between a deductible and a self insured retention is that deductibles reduce the amount of insurance available whereas a self insured retention is applied and the limit of insurance is fully available above that amount.

How does self-insured retention work?

What is Self-Insured Retention? The self-insured retention is a specific dollar amount in a liability insurance policy. Before the insurance policy can take care of any damage, defense or loss, the insured needs to pay this clearly defined amount.

SIR vs Deductible

31 related questions found

Is self-insurance the same as insurance?

Self-insurance involves setting aside your own money to pay for a possible loss instead of purchasing insurance and expecting an insurance company to reimburse you.

What is the maximum deductible?

This year, the IRS defines high deductible health plans as those having a deductible of at least $1,400 for individuals or $2,800 for families. For 2020, out-of-pocket maximums can't surpass $6,900 for an individual plan and $13,800 for a family plan.

Does a deductible reduce the limit?

A Deductible Reduces Your Limit While An SIR Does Not

Deductibles and self-insured retentions are often used in commercial casualty insurance. Both are types of self-insurance. They enable policyholders to retain some of the risk of losses in exchange for a lower premium.

What deductible means?

The amount you pay for covered health care services before your insurance plan starts to pay. With a $2,000 deductible, for example, you pay the first $2,000 of covered services yourself. After you pay your deductible, you usually pay only a copayment or coinsurance for covered services.

How do I find out my deductible?

A deductible can be either a specific dollar amount or a percentage of the total amount of insurance on a policy. The amount is established by the terms of your coverage and can be found on the declarations (or front) page of standard homeowners and auto insurance policies.

Does retention mean deductible?

A retention is essentially the same thing. It's the amount of the loss you pay or retain yourself. The words retention and deductible are often used interchangeably, but there is a slight difference between them. ... You pay a retention up front, whereas you reimburse your insurance company for the deductible.

Does a deductible erode limit?

The insurer provides immediate defense, pays for any losses incurred and then collects reimbursement from the policyholder after the claims is closed, up to the deductible amount. ... Deductibles erode the limit of your insurance policy, while SIR(s) do not.

Do excess policies have deductibles?

Excess Liability Insurance does not typically have a separate deductible. The deductible is considered to be the limits of your underlying insurance — the entire amount that the primary insurer pays for the claim, plus the deductible your primary insurer required you to cover. There is no additional cost to you.

What does retention mean on COI?

In insurance, the word retention is always related to how a company handles its business risk. When you 'retain' risk, it usually means you're not insuring it. The common alternative would be to pay an insurance company an annual premium to take that risk off your hands.

Is insurance a premium?

An insurance premium is the amount of money an individual or business pays for an insurance policy. Insurance premiums are paid for policies that cover healthcare, auto, home, and life insurance. ... It also represents a liability, as the insurer must provide coverage for claims being made against the policy.

What is retained limit?

Retained limit is the limit on other policies that the insured is required to carry, or the self-insured retention, for those exposures where primary coverage is not required.

Is it better to have a $500 deductible or $1000?

A $1,000 deductible is better than a $500 deductible if you can afford the increased out-of-pocket cost in the event of an accident, because a higher deductible means you'll pay lower premiums. Choosing an insurance deductible depends on the size of your emergency fund and how much you can afford for monthly premiums.

Why is my deductible so high?

Why so high? Typically when you have a health insurance plan with a low monthly premium (the monthly payment), you'll have a higher deductible. This means you won't be paying a lot for your monthly bill, but if you need to use your insurance, you'll have to pay for medical expenses until you reach your deductible.

Is a 3000 deductible high?

High-deductible health plans (HDHP) have deductibles of at least $1,700 for single coverage or $3,400 for family coverage. One benefit of a high-deductible plan is that you can usually save money tax-free for future health care costs and employers may contribute money to those accounts.

What is a good deductible for health insurance?

For 2021, the IRS defines a high deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family. An HDHP's total yearly out-of-pocket expenses (including deductibles, copayments, and coinsurance) can't be more than $7,000 for an individual or $14,000 for a family.

What is the disadvantage of having a higher deductible?

Yes, high deductible health plans keep your monthly payments low. But they put you at risk of facing large medical bills you can't afford. Since HDHPs generally only cover preventive care, an accident or emergency could result in very high out of pocket costs.

Does out of pocket cost include deductible?

Out-of-pocket costs include deductibles, coinsurance, and copayments for covered services plus all costs for services that aren't covered.

Is a $0 deductible good?

Is a zero-deductible plan good? A plan without a deductible usually provides good coverage and is a smart choice for those who expect to need expensive medical care or ongoing medical treatment. Choosing health insurance with no deductible usually means paying higher monthly costs.

Do I have to pay copay after deductible is met?

A deductible is a set amount that you must meet for healthcare benefits before your health insurance company starts to pay for your care. Co-pays are typically charged after a deductible has already been met. In most cases, though, co-pays are applied immediately.

What happens if I meet my out-of-pocket maximum before my deductible?

Yes, the amount you spend toward your deductible counts toward what you need to spend to reach your out-of-pocket max. So if you have a health insurance plan with a $1,000 deductible and a $3,000 out-of-pocket maximum, you'll pay $2,000 after your deductible amount before your out-of-pocket limit is reached.