Florida Insurance Licensing 2025 – 400 Free Practice Questions to Pass the Exam

Self-insured retention (SIR) refers to the amount of risk that an insured must retain before the insurance coverage becomes applicable. It is a common feature in liability insurance policies, particularly in situations where businesses might choose to take on a certain level of risk themselves instead of having the insurance company cover every detail of their coverage.

In the context of this question, the situation where self-insured retention is most relevant is when the insured agrees to pay a portion of claims before coverage kicks in. This means that the insured has a financial interest in managing and mitigating risks to avoid claims. Self-insured retention can lead to lower insurance premiums since the insurer takes on less risk, as the insured is responsible for covering a set amount initially.

The other situations described do not align with the concept of self-insured retention. Personal injury claims typically involve full coverage from insurance policies rather than a portion being retained by the insured. Life insurance policies typically cover death benefits and may have specific exclusions, but they do not operate on the principle of self-insured retention like liability policies do. Additionally, a policy being voided due to fraudulent claims relates more to the validity of the contract and does not incorporate the concept of self-insured retention, which focuses on deductible-style arrangements