Louisiana P&C Adjuster Practice Exam

What term describes the portion of risk assumed by the insured that may be in the form of deductible or self-insurance in an Umbrella Policy?

1. Deductible Limit

2. Self-Insured Retention

3. Policy Retention

4. Coverage Limit

The correct answer is: Self-Insured Retention

The portion of risk assumed by the insured in an Umbrella Policy is known as Self-Insured Retention. This term refers to the amount that the insured must cover out of their own pocket before the umbrella policy kicks in to cover additional losses. Specifically, it represents a threshold that must be met by the insured, akin to a deductible but applied in a broader context involving excess liability coverage. This feature is significant because it emphasizes the insured's commitment to taking on a portion of their risk before the insurer becomes liable for any claims above the specific retention amount. Self-Insured Retention reinforces the concept of risk management, requiring the insured to be financially responsible for certain losses while enjoying the added protection of an umbrella policy that covers amounts exceeding that retention level. Other terms such as Deductible Limit generally refer to limits on deductibles in a primary policy context, Policy Retention may imply an ongoing capacity of retaining risk, and Coverage Limit refers to the maximum amount the insurance policy will pay for covered claims. None of these terms fully capture the specific nature of risk assumed by the insured in the context of an Umbrella Policy.