High Deductible vs. Self-Insured Retention
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Everyone wants lower premiums. But not every fleet is ready
for the exposure that comes with a high deductible or self-insured retention
(SIR). These aren’t just big numbers on a quote. They change how claims get
handled, who pays first, and how much control you really have.
These options are built for fleets with solid risk controls, deep pockets, and
experienced teams.
What’s a High Deductible?
A high-deductible plan means the insurance company pays your
claims and then bills you for your share, usually $100,000 or more. The carrier
controls the process, manages defense, and issues payments. You reimburse them
up to your deductible limit.
This is a passive risk financing strategy. You’re not
reserving funds or managing claims directly. You pay as you go, often out of
operating cash or retained earnings.
You get:
- Lower premium than guaranteed cost
- Carrier-driven claims handling
- Predictable support with a bigger out-of-pocket risk
You also get:
- Required collateral or a letter of credit
- No control over how fast or how well claims are
resolved
- The bill for everything under that deductible
What’s a Self-Insured Retention?
SIR is different. It’s active risk. You don’t just pay. You
manage.
With an SIR, you are responsible for everything. Defense,
investigation, payment up to the retention amount. The insurer only steps in
after that number is hit.
Let’s say you’ve got a $100,000 SIR. A claim comes in for
$250,000.
- You handle and pay the first
$100,000
- The carrier pays the
remaining $150,000
You run the front end of the claim. The insurer picks up the
rest, but only after your piece is done.
What’s a TPA and Why It Matters
If you go the SIR route, you better have a TPA.
A third-party administrator is your outsourced claims team.
They handle:
- Legal defense
- Claims adjusting
- Reporting to the excess carrier
- Documentation and compliance
Without one, you’ll need trained staff who understand
liability defense, deadlines, and claim documentation. If your process is
sloppy, the insurer can deny the excess coverage.
High deductible plans don’t usually need TPAs. The insurer
handles everything and you pay them back.
High Deductible vs. SIR: Let’s Break It Down
These two get mixed up a lot, but they are not the same.
With a High Deductible:
- The insurer handles the claim from start to finish
- You pay them back for your portion
- They control the defense
With a SIR:
- You handle the claim, this is a huge difference from the high deductible
- You pay upfront
- The insurer steps in only when the claim exceeds your
SIR
Example:
You’ve got a $100,000 exposure and a $250,000 claim.
- High
Deductible: The insurer pays the full $250,000 and then bills you
$100,000
- SIR:
You pay the first $100,000 directly. Then the insurer pays the other
$150,000
One is hands-off. The other is all-in.
How High is “High”?
In trucking, a high deductible usually starts around
$100,000. Some go to $250,000 or even $1 million. The higher the number, the
lower your premium, but the higher your financial exposure.
These are often used by:
- Fleets with 50 or more units
- Companies with solid cash flow
- Operators with good safety history
- Carriers preparing to go self-insured
What Underwriters Expect
Whether you want a high deductible or an SIR, you need to
prove you’re ready.
That means:
- 3 to 5 years of clean loss runs
- Strong financials with available cash
- Safety protocols and active risk management
- A claims reporting process
- For SIR, a TPA or qualified in-house claims team
With SIR, the bar is higher. The risk is higher. And the
responsibility is all yours.
Reality Check: SIR Isn’t for New or Small Carriers
We get the appeal. SIR sounds like a smart way to save money
and take control. But for small or newer carriers, it rarely makes sense.
Most insurers won’t even talk about SIR unless you’re
running 50 to 100 units. A one- or two-truck operation doesn’t have the
history, cash, or staffing to carry that kind of risk.
To qualify, you need:
- Years of clean loss data
- Enough cash to fund a six-figure claim
- Claims and legal processes you control
- A backup plan if something escalates
Some coverages like workers comp and auto liability are also
regulated at the state level. You can’t just decide to go self-insured. You
need to be approved, bonded, and audited.
For small fleets, the smarter move is tightening safety,
improving your loss ratios, and working your way into loss-sensitive programs
over time. SIR isn’t the starting point. It’s the milestone.
Final Word
High deductibles and SIRs are not the same thing. If you
just want to lower your premium and are okay letting the insurer handle claims,
a high deductible plan might work. If you want full control and can manage the
liability, SIR gives you that. But it comes with risk you have to be ready to
carry.
Pick the option that matches your operations, not just the
one with the lower price.
Want help reviewing your options?
Shoot us an email at info@trucku.biz. We’ll walk you through it line by
line and show you what your numbers actually mean.
This post is for educational purposes only. It’s not legal advice, insurance advice, or a substitute for calling your agent. We’re good, but we’re not psychic. Policies vary, laws change, and courtrooms get weird. Don’t make decisions based solely on something you read on the internet, unless it’s from us, in writing, with your name on it.
All opinions are our own and do not represent the views of any carrier, employer, or underwriting department that occasionally wishes we were quieter on LinkedIn.
