Antonia has a general liability policy with a self-insured retention of $50,000. The policy has an occurrence limit of $250,000 and an aggregate limit of $500,000. She had submitted one prior claim this policy term for which $100,000 was paid by the insurer. How much will Antonia's insurer pay on a subsequent claim under the same policy period that is valued at $400,000?

• A. $200,000
• B. $250,000
• C. $400,000
• D. $500,000

Answer: (B)

Self-insured retention works like a per-loss deductible: the insured pays up to that amount for each claim, and the insurer covers the amount above it, up to the per-occurrence limit, with all payments counting against the aggregate limit.

For the new claim worth 400,000, the insured must first cover the SIR of 50,000. That leaves 350,000 in loss to be addressed. The insurer will pay up to the per-occurrence limit of 250,000 for this single occurrence. So, the insurer pays 250,000 on this claim. The insured would then be responsible for the remaining 100,000 of the loss, in addition to the 50,000 SIR already paid, totaling 150,000 out-of-pocket for this claim.

Additionally, the prior claim already paid by the insurer (100,000) reduces the remaining aggregate limit from 500,000 to 400,000, but the new claim’s insurer payment of 250,000 plus the prior 100,000 still stays within the aggregate limit. Therefore, the insurer’s payment on the new claim is 250,000.