What is a self-insured retention (SIR)?

A self-insured retention (SIR) is a policy used to protect an insurance company from having to pay out large amounts in insurance claims. In Arkansas, SIRs are a form of risk management that are used to limit the amount of money an insurance company may have to pay out on claims. SIRs require the policyholder to first pay a certain amount of their own money, usually referred to as a deductible, out of their own pocket before they can be reimbursed by their insurance policy. This deductible amount is the “retention” or “self-insured retention”. For example, if a policyholder has a $10,000 SIR on a property damage claim, they must pay the first $10,000 of the claim out of their own pocket, and the insurance company will pay the remainder. By having a policyholder pay the first portion of a claim, an insurance company can limit their exposure to large claims. In Arkansas, insurance companies must be very transparent when it comes to setting SIRs. The Arkansas Insurance Department requires insurance companies to explain the SIR to policyholders in detail and in a clear and understandable way. This helps ensure that policyholders have a clear understanding of the SIR before signing and agreeing to any insurance policy.

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What is a self-insured retention (SIR)?

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