What is an example of self-insured retention?

Self-insured retention refers to the amount of risk that an insured party decides to retain rather than transfer to the insurance company. In this case, opting to pay for minor repairs out-of-pocket exemplifies self-insured retention because the individual is choosing to handle certain costs directly, essentially acting as their own insurer for those specific expenses.

This approach allows individuals or businesses to save on premiums since they assume the risk for smaller claims. Rather than filing a claim for a minor issue, which could lead to increased premiums or complexities in the claims process, they absorb the cost themselves, demonstrating a willingness to retain some level of risk.

The other options describe actions that do not align with the concept of self-insured retention. Purchasing a deductible on an auto insurance policy is a common practice where the insurer pays for losses above a certain threshold, not an example of retaining risk. Insuring only high-value assets does not involve retaining risk but rather selectively choosing what to insure. Claiming the full value of an asset on insurance indicates a desire to transfer risk completely to the insurance provider, contrasting with the idea of self-insuring any portion of risk.