What is the difference between a self-insured retention and a deductible?

Under a deductible program, the insurer typically handles and pays the claim from the first dollar and then seeks reimbursement from you for the deductible amount. The insurer duty to defend attaches immediately, and the claim is inside its system throughout.

Under a self-insured retention, the insurer has no payment obligation until the retention is exhausted. You handle and fund the claim below that level, and the insurer participates above it. Many senior care programs above a certain size are written this way.

Because the insurer is paying from dollar one under a deductible, it appoints counsel and directs strategy from the beginning. That can be an advantage for an operator without claims infrastructure, and a disadvantage for one who wants continuity with defense counsel who know their charting and their state.

Under a retention, the operator usually directs the defense below the attachment point, subject to whatever approval rights the policy reserves. That is worth having in senior care, where the same firm handling your fourth fall case resolves it faster than a new one, but it only works if you have someone whose job is to manage it.

A retention is an obligation you fund, and insurers frequently require collateral to secure it, typically a letter of credit. That facility reduces borrowing capacity elsewhere, which matters for an operator carrying real estate debt or planning a refinance.

A deductible program can also carry collateral requirements, but the accounting treatment and the conversation with your lender are usually different. Neither is inherently better; the point is that both are balance sheet decisions and should involve whoever manages the balance sheet rather than being settled inside the insurance conversation.

Whichever structure applies, the term that decides what it costs you is whether defense expense erodes it. If defense counts toward satisfying the retention or deductible, successfully defended claims move you toward insurer participation. If it does not, every defended claim is fully out of pocket and the insurance never engages.

Model it against your own five-year claim count rather than against severity. For a frequency-heavy operation the erosion treatment moves the true cost more than the retention amount does.

Confirm which structure you actually have, in the policy rather than in the proposal. Confirm whether defense erodes it. Confirm who selects counsel below the attachment point and, if the answer is the insurer, whether your existing firm can be added to the approved panel.

Then confirm the collateral requirement and its form, and put that number in front of your CFO before binding rather than after. A retention that looked like a premium saving and turns out to consume a letter of credit facility is not a saving.