Self-Insured Retention (SIR)
The amount a business must pay before insurance coverage begins to apply
Detailed Explanation
Unlike a deductible, where the insurer handles the claim and then subtracts the deductible amount, with an SIR, the business is responsible for managing and paying claims below the SIR amount.
Practical Example
A transportation company has a liability policy with a $50,000 SIR. When faced with a $75,000 claim, they must handle claim management and pay the first $50,000 themselves. Their insurance only becomes involved after this threshold is met, paying the remaining $25,000.
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