A self-retention insurance policy, also known as a self-insured retention (SIR) policy, is a type of insurance policy that allows businesses to assume a portion of the risk associated with their insurance coverage. Under a self-retention policy, the insured party is responsible for paying a predetermined amount, known as the retention amount, for each covered claim. Once the retention amount has been paid, the insurance company assumes responsibility for the remainder of the claim.

Here are some key features of a self-retention insurance policy:

Retention Amount

The retention amount is the portion of each claim that the insured party is responsible for paying. This amount is agreed upon between the insured and the insurance company at the time the policy is issued. The retention amount can range from a few thousand dollars to millions of dollars, depending on the size and risk profile of the insured party.

Claims Handling

Under a self-retention policy, the insured party is responsible for handling the claims process up to the retention amount. This means that the insured party must investigate, evaluate and settle claims within the retention amount on their own. Once the retention amount has been paid, the insurance company assumes responsibility for handling the remainder of the claim.

Premiums

Self-retention policies typically have lower premiums than traditional insurance policies because the insured party assumes a portion of the risk associated with the coverage. This can result in cost savings for businesses that are able to effectively manage their risk exposure.

Risk Management

Self-retention policies provide businesses with a direct financial incentive to implement effective risk management strategies. By assuming a portion of the risk associated with their insurance coverage, businesses are motivated to implement measures that can help prevent losses and reduce the likelihood of claims.

Claims History

Under a self-retention policy, the insured party’s claims history is an important factor in determining the cost of future coverage. Insured parties with a favorable claims history may be able to negotiate lower retention amounts and premiums, while those with a poor claims history may face higher costs.

In conclusion, a self-retention insurance policy can be a cost-effective option for businesses that are willing to assume a portion of the risk associated with their insurance coverage. By doing so, businesses can benefit from lower premiums, greater control over the claims process, and a direct financial incentive to implement effective risk management strategies. However, it is important to carefully consider the potential risks and benefits before deciding whether a self-retention policy is the right choice for your business.

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Matthew.collins@ascendbroking.co.uk  |  Office: 01245 449 060