Self-Insured Retention Analysis Calculator

How is an SIR different from a deductible in practice?

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.

Why would a company choose a high SIR over a low one?

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.

What happens if actual claims come in much higher than expected?

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.

Do I need collateral to carry a self-insured retention?

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.