ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Avoid Subcontractor Self-Insured Retention Losses

Updated on November 18, 2009
Avoid subcontractor self-insured retention losses.
Avoid subcontractor self-insured retention losses.

A self-insured retention (SIR) is a specified dollar amount in a commercial liability insurance policy that must be paid by the policy holder before the insurance company will respond to a claim.  It is similar to a deductible in a homeowner’s insurance policy, except that a deductible is “deducted” from the total of the claim while the self-insured retention and the liability policy limit are “stacked” (or added together) to cover the total claim.  A second important distinction is that the insured must pay the SIR directly to the claimant before the insurance company will get involved.  Many of the large commercial insurers such as Zurich, Travelers, XL Group, and Philadelphia sell policies that encourage SIRs as a way to limit overall premiums and many smaller or financially unstable companies take them on to reduce expenses.  

Obtain and review subcontractor's insurance certificates.
Obtain and review subcontractor's insurance certificates.

Some companies may take on SIRs of $500,000 or more to lower their premiums. The insurer does not investigate the insured’s ability to cover the SIR because it does not have to respond to a claim until the SIR is paid. Unfortunately, this means that if you hire that company as a subcontractor and a claim results from their negligence, you may end up responsible for the loss if the subcontractor is financially unable to meet their SIR obligation. I had this exact situation happen when a subcontractor’s negligence allowed water intrusion into an apartment complex, which led to an extensive mold growth problem. When my client discovered its subcontractor was financially unable to cover its $625,000 SIR, they considered the recent runaway jury verdicts on mold claims and agreed to settle. This was a $625,000 lesson learned the hard way.

Follow these steps to avoid winding up with your subcontractor’s SIR losses.

  • Always obtain certificates of insurance from your subcontractors and subconsultants. Do not sign a contract or allow the subcontractor or subconsultant to start work until they have provided this evidence of coverage.
  • Establish a procedure to review the types and limits of policies, deductibles, and SIRs. As a rule of thumb, do not hire a subcontractor or subconsultant if they have an SIR greater than $50,000. If there is no option, evaluate the company’s ability to meet its financial obligations. The company should have cash or assets equal to at least the amount of the SIR. If it doesn’t, consider a requirement that they reduce or eliminate the SIR, or require procurement of a bond guaranteeing payment of losses in the event of a claim.
  • Require that subcontractors and subconsultants provide annual, audited financial statements so you can review their continued financial health.


This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

Show Details
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
ClickscoThis is a data management platform studying reader behavior (Privacy Policy)