Question

An Umbrella Policy may be broader than the underlying policies and respond as primary coverage. When the Umbrella is PRIMARY, there is an amount to be paid by the insured before the Umbrella will pay. What is this amount called?

Answer 1

The amount paid by the insured before an umbrella policy becomes primary is called the self-insured retention (SIR), which functions similarly to a deductible.

Step-by-step explanation:

The amount that must be paid by the insured before an umbrella policy provides primary coverage is called the self-insured retention (SIR). This is similar to a deductible, but it may be required to be paid before the umbrella coverage becomes primary, rather than underlying policies. Like deductibles, copayments, and coinsurance, which are mechanisms in insurance policies to share the cost with the policyholder, the SIR is designed to reduce moral hazard and ensure that the insured has a stake in the risk management process.