Retention Deductible

What Does Retention Deductible Mean?

A retention deductible is a provision in an umbrella insurance policy that specifies the deductible amount the policyholder must pay for losses not covered by any underlying policy. The exact deductible amount is determined by the terms outlined in the specific umbrella policy. The provision works the same way in commercial umbrella insurance when a business loss falls outside its underlying general liability or auto coverage.

Insuranceopedia Explains Retention Deductible

A retention deductible applies when no underlying primary policy covers the specific loss. Once the deductible is paid, the umbrella policy will provide coverage, ensuring the policyholder is reimbursed for covered losses, helping to avoid financial catastrophe in the event of a significant loss. Because the umbrella only pays once the primary policy’s limits are used up, it is worth checking how much liability insurance you need on your auto or home policy before adding an umbrella on top.

Retention deductibles also benefit insurance companies by slightly reducing the amount they pay out on umbrella insurance claims.