A self-insured retention is the amount of loss you must pay out of your own funds before your insurance policy begins to respond. It is similar to a deductible but with important differences. With a deductible, the insurer pays the full claim and then bills you for the deductible amount. With an SIR, you must pay the retention amount first, and only after you have satisfied the SIR does the insurer begin paying. This means you are responsible for defense costs and claim payments up to the SIR amount from day one of the claim.
SIRs are most common on umbrella and excess liability policies, though some primary CGL policies for larger roofing contractors also use them. A typical SIR for a mid-size roofing contractor might be $10,000 to $25,000. Larger contractors or those in hard insurance markets may have SIRs of $50,000 to $250,000. The higher the SIR, the lower your premium, because you are retaining more risk.
For roofing contractors considering a policy with an SIR, the key question is whether you have the financial capacity to fund the retention out of operating cash flow when a claim occurs. Unlike a deductible where the insurer advances payment, an SIR requires you to write the checks. If you cannot fund the SIR, the claim may go unpaid, which can result in a default judgment against you. Your broker should discuss SIR options in the context of your financial reserves and risk tolerance. For most small to mid-size roofing contractors, a standard deductible structure is more appropriate than an SIR because it provides immediate defense and payment from the carrier.