I guess you can think of it as a deductible with different terminologies. But there are some small differences.
Let's say an insured has a $100K SIR/Deductible and a 1M liability policy.
Under a SIR:
If a claim is $80,000, the insured pays the full amount, and the insurer does nothing.
If a claim is $250,000, the insured pays $100,000 (SIR), and the insurer covers $150,000.
Under a deductible:
If a claim is $50,000, the insurer pays $50,000 to the claimant, then bills the insured for $50,000.
If a claim is $500,000, the insurer pays $500,000, then collects $10,000 from the insured.
Under a SIR, the insurer only becomes involved once the retention is breached but with a deductible, the insurer is involved even if the loss amount is below the deductible.
Under a SIR, claims below the deductible are paid first by the insured while with a deductible, the insurer always pays first.
Comments
I guess you can think of it as a deductible with different terminologies. But there are some small differences.
Let's say an insured has a $100K SIR/Deductible and a 1M liability policy.
Under a SIR:
Under a deductible:
Under a SIR, the insurer only becomes involved once the retention is breached but with a deductible, the insurer is involved even if the loss amount is below the deductible.
Under a SIR, claims below the deductible are paid first by the insured while with a deductible, the insurer always pays first.