Insurance · Umbrella and Excess

What is a 'self-insured retention' (SIR) in an umbrella or excess policy?

Correct answer

An amount the insured must pay before the umbrella coverage applies for claims not covered by the underlying policy — functioning like a deductible

  1. A A discount for self-insurance
  2. B Insurance for the insured's retention
  3. C A fee for the umbrella
  4. D An amount the insured must pay before the umbrella coverage applies for claims not covered by the underlying policy — functioning like a deductible

Why this is the answer

The Self-Insured Retention (SIR) in an umbrella policy applies to claims that are covered by the umbrella but not by underlying primary policies (a 'gap' the umbrella alone covers). The SIR is the amount the insured must pay out of pocket before the umbrella responds for these claims — typically $250 to $25,000 for personal umbrellas, more for commercial. The SIR is distinct from the underlying limit (the amount of primary insurance that must exist before the umbrella attaches for claims covered by both). For claims covered by underlying policies, the umbrella pays only after the underlying limit is exhausted; no SIR applies. For claims covered only by the umbrella (broader coverage), the SIR applies as a deductible. The SIR ensures the insured has some 'skin in the game' even for gap-filling claims and keeps umbrella premiums affordable.
Source: NAIC Model Outline, SIR

Practice more questions

This question is from our Insurance License Practice Tests practice test. Take the full practice test to test your knowledge across all Umbrella and Excess and other topics.

Take the Casualty Insurance practice test →

About this topic: Umbrella and Excess

Umbrella and excess liability questions cover how these policies sit above underlying coverage, retained limits, drop-down coverage and the requirement to maintain underlying limits. This is one of 5 Casualty Insurance questions on umbrella and excess, each with a full explanation on a single study page.

New to this exam? Our Insurance exam guide explains the format, scoring, and how to prepare.

Related questions

State-specific guides

Need information for your state? Our state guides cover local requirements, fees, and what to expect on exam day.