Self insured retention applies only if which condition is satisfied?

• A. Insurance is provided by the umbrella policy but not by underlying policies
• B. Insurance is provided by the underlying policy only
• C. The claim exceeds the umbrella limit
• D. The insured pays the premium directly to the insurer

Answer: (A)

Self insured retention works like a deductible applied to an umbrella (or excess) policy. It represents the amount the insured must pay out of pocket on each loss before the umbrella policy pays. This only makes sense when the umbrella policy is providing coverage for the loss and there are no corresponding primary coverages from the underlying policies. If the underlying policies would cover the loss, the umbrella would sit on top of them and the retention wouldn’t be triggered in the same way.

So the condition that triggers a self insured retention is when the umbrella policy provides the coverage but the underlying policies do not. If the loss is covered entirely by underlying policies, there’s no need for the umbrella’s retention to apply. If the claim exceeds the umbrella limit, that’s about what happens after the umbrella is exhausted, not whether the retention applies. The insured paying the premium directly to the insurer has no bearing on whether SIR applies.