{
  "slug": "self-insured-retention-analysis",
  "title": "Self-Insured Retention (SIR) Analysis Calculator",
  "heading": "Self-Insured Retention Analysis Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/self-insured-retention-analysis",
  "summary": "Compare total cost of carrying a higher SIR against the premium savings it generates.",
  "description": "A self-insured retention (SIR) is similar to a deductible but structurally different: with an SIR, you (or a third-party administrator) handle and pay claims yourself up to the retention amount before the excess policy responds at all, rather than the insurer paying first and collecting your deductible later. Businesses choose higher SIRs to cut premium meaningfully, but that only makes financial sense if expected claims frequency and severity stay well within your retention layer and you have the cash flow and claims-handling capability to absorb it. This calculator compares total expected annual cost — premium plus expected retained losses — across a low-SIR and high-SIR option, using your expected claims frequency and average claim severity, so you can see the true breakeven point rather than just chasing the lower premium quote.",
  "formula": "Total cost = premium + min(expected claims × avg severity, SIR × expected claims count) approximated as expected annual retained losses capped per-claim at the SIR.",
  "dateModified": "2026-09-30",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=self-insured-retention-analysis",
  "inputs": [
    {
      "id": "lowSirAmount",
      "label": "Low SIR option amount",
      "kind": "number",
      "hint": null,
      "default": 10000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "lowSirPremium",
      "label": "Low SIR annual premium",
      "kind": "number",
      "hint": null,
      "default": 85000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "highSirAmount",
      "label": "High SIR option amount",
      "kind": "number",
      "hint": null,
      "default": 50000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "highSirPremium",
      "label": "High SIR annual premium",
      "kind": "number",
      "hint": null,
      "default": 55000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "expectedClaimsPerYear",
      "label": "Expected claims per year",
      "kind": "number",
      "hint": null,
      "default": 4,
      "unit": null,
      "min": 0,
      "max": 100
    },
    {
      "id": "avgClaimSeverity",
      "label": "Average claim severity",
      "kind": "number",
      "hint": null,
      "default": 8000,
      "unit": "$",
      "min": 0,
      "max": null
    }
  ],
  "outputs": [
    {
      "id": "highTotal",
      "label": "High SIR total expected cost",
      "format": "currency",
      "hint": null,
      "primary": true
    },
    {
      "id": "lowTotal",
      "label": "Low SIR total expected cost",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "savings",
      "label": "Savings choosing high SIR",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "breakEvenClaims",
      "label": "Breakeven claims count per year",
      "format": "number",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Low SIR option amount: 10000 $",
      "Low SIR annual premium: 85000 $",
      "High SIR option amount: 50000 $",
      "High SIR annual premium: 55000 $",
      "Expected claims per year: 4",
      "Average claim severity: 8000 $"
    ],
    "outputs": [
      "High SIR total expected cost: $87,000",
      "Low SIR total expected cost: $117,000",
      "Savings choosing high SIR: $30,000",
      "Breakeven claims count per year: 30,000"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter low sir option amount ($).",
      "Enter low sir annual premium ($).",
      "Enter high sir option amount ($).",
      "Enter high sir annual premium ($).",
      "Enter expected claims per year.",
      "Enter average claim severity ($).",
      "Read your high sir total expected cost on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "lowSirAmount": 6000,
        "lowSirPremium": 51000,
        "highSirAmount": 30000,
        "highSirPremium": 33000,
        "expectedClaimsPerYear": 2,
        "avgClaimSeverity": 5000
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "lowSirAmount": 10000,
        "lowSirPremium": 85000,
        "highSirAmount": 50000,
        "highSirPremium": 55000,
        "expectedClaimsPerYear": 4,
        "avgClaimSeverity": 8000
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "lowSirAmount": 16000,
        "lowSirPremium": 136000,
        "highSirAmount": 80000,
        "highSirPremium": 88000,
        "expectedClaimsPerYear": 6,
        "avgClaimSeverity": 13000
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "How is an SIR different from a deductible in practice?",
      "a": "With a deductible, the insurer pays the full claim first, then bills you for the deductible amount afterward, meaning the insurer controls the claim from dollar one. With an SIR, you or your TPA handle the claim entirely — investigation, defense, and payment — until the retention is exhausted, and only then does the excess carrier's policy and claims team get involved. SIRs generally require more sophisticated in-house or outsourced claims handling."
    },
    {
      "q": "Why would a company choose a high SIR over a low one?",
      "a": "A higher SIR shifts more claims-dollar risk to the company but typically cuts premium substantially, since the insurer's expected payout drops sharply once frequent, small claims are entirely retained. This works well for financially stable companies with predictable, well-understood claims history and the cash flow to self-fund routine losses without disrupting operations."
    },
    {
      "q": "What happens if actual claims come in much higher than expected?",
      "a": "You bear that variance up to the retention amount per claim, which is the core risk of choosing a high SIR — a bad year with claims frequency or severity well above your historical average can wipe out the premium savings and then some. This is why insurers and brokers stress-test SIR decisions against multiple years of loss history, not just an average year."
    },
    {
      "q": "Do I need collateral to carry a self-insured retention?",
      "a": "Often yes, especially for workers' comp or larger commercial SIRs — the excess carrier commonly requires a letter of credit or collateral trust to guarantee you can fund your retained losses, since they're exposed if you can't pay claims within the SIR layer. Collateral requirements add a real cost to factor in beyond the premium comparison shown here."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/professional-liability-limit-sizing",
    "https://www.revenuelab.fyi/toolbox/workers-comp-premium-by-class-code"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — Self-Insured Retention (SIR) Analysis Calculator (https://www.revenuelab.fyi/toolbox/self-insured-retention-analysis)"
}