A self-insured retention (SIR) is the amount of money *you* must pay out of pocket before your insurance kicks in. It's like a very high deductible. For example, if your SIR is £50,000 and you face a £100,000 claim, you pay the first £50,000 yourself, and insurance covers the remaining £50,000. This shifts financial risk to you because you're essentially self-insuring that first chunk. Companies often demand high SIRs (£25,000–£250,000+) to reduce their own insurance costs. The risk is real: if you can't afford to pay the SIR when a claim hits, you could face serious financial hardship even though you have insurance.
Only accept an SIR you can actually afford to pay immediately—treat it as money you must have in reserve. Negotiate the SIR down to a level that matches your cash reserves, and never accept one so high that paying it would cripple your business. Get clarity on whether the SIR applies per claim or per year. ---
Frequently Asked Questions
What does this clause mean in simple terms?
A self-insured retention (SIR) is the amount of money *you* must pay out of pocket before your insurance kicks in.
Why should I care about this clause?
It's like a very high deductible.
What are my options?
For example, if your SIR is £50,000 and you face a £100,000 claim, you pay the first £50,000 yourself, and insurance covers the remaining £50,000.
How does this affect small businesses?
This shifts financial risk to you because you're essentially self-insuring that first chunk.