Written & reviewed by a licensed insurance professional — WJB Services, Inc. dba Bollinsure Insurance Services · CA DOI License #6013787
Self-insured share guide

EPLI Retention: Your Share of Each Claim

A plain-English guide to EPLI retentions — what they are, how they differ from deductibles, how to choose the right amount, and how retention selection affects your premium.

What is an EPLI retention?

An EPLI retention is the per-claim amount you pay out of pocket before your insurer contributes to a covered loss. It functions like a deductible — but with an important difference: you fund it first, before the carrier pays anything, rather than receiving reimbursement later.

Retentions apply per claim (not per policy period) and typically range from $2,500 to $50,000+ depending on employer size, industry, and the carrier's form. The right retention depends on how much out-of-pocket exposure you can absorb on any single claim — including nuisance claims that settle quickly.

Common retention levels

Who each retention suits

Retention
Typically suits
Notes
$2,500
Very small employers (1–10 employees), first-time EPLI buyers, budget-sensitive businesses
Low out-of-pocket on nuisance claims. Produces the highest premium but maximum insurer support from dollar one (after the retention).
$5,000
Small employers (10–25 employees) with adequate cash reserves
Most common sweet spot for California small businesses. Manageable out-of-pocket with a meaningful premium reduction versus $2,500.
$10,000
Employers with 25–75 employees and solid cash flow; HR-confident businesses
Produces a notable premium reduction. Appropriate where management is confident in early claim resolution and HR documentation is strong.
$25,000
Mid-size employers (75–200 employees); businesses that self-insure small losses
Significant premium savings. Requires capacity to fund the retention multiple times per year if concurrent claims arise.
$50,000+
Larger employers (200+ employees), staffing firms, businesses with formal risk management programs
Used where premium savings are a priority and the employer has the financial capacity and HR infrastructure to manage claims at the early stage.
Premium impact

Higher retention = lower premium

Accepting a higher retention reduces the insurer's expected loss cost, which flows directly to your premium. The table below shows typical premium reduction ranges relative to a $2,500 retention baseline. Actual savings vary by carrier, class, and risk profile — these are illustrative, subject to underwriting.

Retention
Typical premium reduction vs $2,500
Your max out-of-pocket per claim
$2,500
Baseline
$2,500
$5,000
5–10% lower
$5,000
$10,000
10–18% lower
$10,000
$25,000
18–28% lower
$25,000
$50,000
25–38% lower
$50,000

Illustrative ranges only. Subject to underwriting, carrier, and risk class. Not a commitment to insure or guarantee of premium.

Policy form variation

Does retention apply to defense costs?

This is a critical policy form question — and the answer varies by carrier and form. There are two common structures:

Form A — Most common
Retention applies to defense + indemnity

The first dollars of both defense costs and any settlement or judgment come from your retention. If your retention is $10,000 and your defense attorney bills $10,000, your full retention is consumed before the insurer pays anything — even if the claim ultimately has no settlement.

Form B — Less common
Retention applies to indemnity only

Defense costs are fully insurer-funded from dollar one, with the retention applying only to any settlement or judgment. This structure is more favorable to the insured but is less common and may come with a higher premium or lower limit availability.

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Always ask: Does the retention apply to defense costs, indemnity, or both? For a $10,000 retention employer with active California claims, this distinction is material to your real out-of-pocket exposure.

Decision framework

Choosing the right retention

Three questions drive the right retention selection:

1
Cash flow: can you fund it multiple times?
Retentions apply per claim, not per year. A $10,000 retention employer who faces three concurrent claims needs $30,000 available. Choose a retention your business could fund at least twice in the same year without financial strain.
2
Risk appetite: how much self-insurance is comfortable?
A higher retention is essentially a decision to self-insure the smaller losses. If your business culture prefers transferring even nuisance-claim costs, keep the retention low. If you'd rather save premium and handle the first dollars yourself, go higher.
3
Premium sensitivity: how much does each step save?
Ask your broker to show you the premium at multiple retention levels. Sometimes the jump from $5,000 to $10,000 saves very little premium — in which case the lower retention is clearly the better deal. Sometimes the savings are substantial and justify accepting more self-insurance.
Advanced structure

Aggregate retention

Some EPLI forms include an aggregate retention — a cap on the total retention amount you pay across all claims in a policy year. For example, a policy might carry a $10,000 per-claim retention with a $30,000 annual aggregate retention. Once you have paid $30,000 in retention across all claims in that year, the insurer handles additional claims from dollar one.

Aggregate retentions are more common on larger accounts and specialty-market placements. They add meaningful protection for higher-exposure employers where multiple concurrent claims are realistic. Ask your broker whether an aggregate retention cap is available — and what it costs.

Keep exploring

Related guides

DEDUCTIBLE VS RETENTION
Deductible vs retention
Key differences explained.
POLICY LIMITS
EPLI limits guide
$500K to $3M+ explained.
DEFENSE COSTS
Defense costs guide
Inside vs outside limits.
EPLI COST
EPLI pricing overview
What employers typically pay.
Common questions

EPLI retention FAQ

What is an EPLI retention?
An EPLI retention is the per-claim self-insured amount you pay before the insurer contributes. Unlike a traditional deductible where the carrier pays first and then seeks reimbursement, a retention requires you to fund your share first. Retentions typically range from $2,500 to $50,000+ depending on employer size and risk profile.
Does the retention apply to defense costs?
It depends on the policy form. Most standard EPLI forms apply the retention to the combined total of defense costs and indemnity — meaning the first dollars of legal defense come from your pocket. Some forms apply retention only to indemnity, leaving defense fully insurer-funded from dollar one. Always confirm this before binding.
How does a higher retention lower my EPLI premium?
When you accept a higher retention, you take on a larger share of expected losses, reducing the carrier's exposure. This flows to a lower premium. Moving from a $2,500 to a $10,000 retention often produces a 10–18% premium reduction, though exact savings vary by carrier and risk class.
What EPLI retention should a small business choose?
Most small businesses with good cash flow choose a $2,500–$5,000 per-claim retention. This keeps out-of-pocket exposure manageable on nuisance claims while keeping premium reasonable. The key question is: can you fund this retention at least twice in one year if concurrent claims arise? If not, lower the retention. See our deductible vs retention guide for more context.
Find the right retention

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