Under a policy with a self-insured retention, once the SIR is exhausted, the insurer is obligated to pay up to which limit?

• A. The aggregate limit.
• B. The occurrence limit.
• C. The SIR beyond which the insured pays.
• D. The insured pays all further claims.

Answer: (B)

The key idea is how a self-insured retention functions like a deductible for each claim. With an SIR in place, the insured covers losses up to that retention amount for every occurrence. Once that SIR is satisfied for a given event, the insurer steps in to cover the remaining liability, but only up to the policy’s limit for that occurrence. In other words, after the insured has paid the SIR, the insurer pays the balance up to the per-occurrence limit for that single event.

It’s important to keep in mind the difference between per-occurrence and aggregate limits. The per-occurrence limit caps the insurer’s payment for any one incident, while the aggregate limit caps the total payments across all incidents in the policy period. So after the SIR is exhausted for a single occurrence, the insurer’s obligation for that occurrence is up to the per-occurrence limit, not the aggregate limit.

For example, if the SIR is 100,000 and the per-occurrence limit is 1,000,000, a single loss of 600,000 would see the insured pay 100,000, and the insurer pay 500,000 (up to the per-occurrence limit). If multiple occurrences occur, the aggregate limit may come into play overall, but the question focuses on the limit that applies once the SIR has been exhausted for an occurrence—the per-occurrence limit.