Glossary
Self-Insured Retention (SIR)
By LiabilityGap EditorialUpdated 2 min read
The short answer
What is the self-insured retention on an umbrella policy, and how is it different from a deductible?
A self-insured retention (SIR) is the amount, commonly $500 to $2,500 on Canadian personal umbrella policies, you pay yourself before the umbrella responds directly to a claim no underlying policy covers. Unlike a deductible, it only applies when the umbrella is the first payer; claims your home or auto policy already covers need no SIR.
A self-insured retention (SIR) is the amount you must pay out of your own pocket — commonly $500 to $2,500 on Canadian personal umbrella policies — before the umbrella pays a claim it is responding to directly. It only comes into play for claims none of your underlying policies cover: the situations where a true umbrella policy is broader than the home and auto policies beneath it, such as a defamation claim your home policy excludes. For those claims there is no underlying insurer to pay first, so the SIR stands in as the "underlying" layer, and the umbrella pays everything above it up to its limit.
An SIR is not a deductible, though they rhyme. A deductible is subtracted from a claim your insurer is already paying. An SIR determines when the umbrella engages at all on a direct-response claim. When a claim is covered by your auto or home policy, the SIR is irrelevant — the underlying policy's $1 million limit is what sits beneath the umbrella, and the umbrella simply pays the excess.
Why it matters to you#
The SIR is the honest price of the umbrella's extra breadth. A pure excess liability policy has no need for one, because it only ever pays on top of underlying coverage; the presence of an SIR in the wording is a decent clue you're holding a true umbrella that can drop down and cover claims your base policies won't. On personal policies the retention is small — a few hundred to a few thousand dollars against a policy that can pay out millions — so it's rarely a reason to skip the coverage. It is, however, worth confirming the number before you buy, since wordings vary by insurer.
In practice#
- You're sued for defamation over an online review. Your home policy excludes it; your umbrella covers it. You pay the $1,000 SIR; the umbrella funds the defence and any settlement above it.
- You're sued over a car crash. Your auto policy responds first, so no SIR applies — the umbrella just pays above the auto limit.
- Commercial umbrella policies work the same way but with much larger retentions, often $10,000 and up.
Frequently asked questions
What is a self-insured retention (SIR)?
A self-insured retention is the amount you must pay out of your own pocket — commonly $500 to $2,500 on Canadian personal umbrella policies — when the umbrella responds directly to a claim that no underlying policy covers. The umbrella pays above that amount.
What is the difference between a self-insured retention and a deductible?
A deductible is subtracted from a claim your insurer is already handling. A self-insured retention only applies when the umbrella policy responds on its own, with no underlying policy involved — for claims your home or auto policy covers, the underlying limit itself fills the gap and no SIR is charged.
How big is the SIR on a personal umbrella policy?
Commonly $500 to $2,500 on Canadian personal umbrella policies, though wordings vary by insurer. Commercial policies can carry retentions of $10,000 or far more.
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