Contractual Liability Insurance Policy

Contractual Liability Insurance Policy CLIP for Service Contract Providers


What is a Contractual Liability Insurance Policy CLIP?

While the states generally recognize a service contract as a non insurance product they do have others requirements that a provider (aka Obligor) needs to satisfy.

Many states now require a financial guarantee to allow a service contract provider to operate in their state. These guarantees are designed to ensure that a purchaser will receive the benefit they purchased - should the provider not perform its obligations. The states have seen many service contract providers fail in the past and these requirements are designed to protect the consumer.

Financial guarantees can include posting a defined percentage of the gross retail consideration as security (surety bond, securities, cash) in a claims reserve account, providing a parental guarantee from an entity with net equity in excess of $100m (or other amount) or a Contractual Liability Insurance Policy CLIP sometimes referred to as a Service Contract Reimbursement Insurance Policy SCRIP.

Here are just a few state level examples of various guides and regs for service contract providers. The information contained on this page cannot be relied upon or construed as Legal Advice or Compliance Guidance since this is only a very small sample for example only purposes and the regs change on a regular basis:


In some states, a Contractual Liability Insurance Policy CLIP / Service Contract Reimbursement Insurance Policy SCRIP is the only viable option available to a service contract provider to comply with the states requirements. Failure to comply with these requirement are often dealt with harshly by the state regulatory agencies.

The Contractual Liability Insurance Policy CLIP / Service Contract Reimbursement Insurance Policy SCRIP will generally need to be issued by an insurance carrier authorized in the state and provide for payment of any covered claims offered in the service contract.

A Contractual Liability Insurance Policy CLIP / Service Contract Reimbursement Insurance Policy SCRIP is often required by lenders to satisfy their requirements before they will advance on a vehicle loan that includes a vehicle service contract or other ancillary product. This includes vehicle service contracts, GAP, etch, appearance protection, tire and wheel, maintenance, key fob, dent and ding, windshield and other similar products. Different product types may have different requirements on a state by state level: Home Warranty, Consumer Products, Automotive, LED, Solar, Generators, HVAC and other Commercial Products for example.

A Contractual Liability Insurance Policy CLIP may also be utilized to support various Product Warranty Insurance and Limited Warranty & Service Contract oriented solution for OEMs, retailers and solution providers.

Michael Frosch, Principal of Personal Safeguards Group, LLC, assists Dealers, Retailers, Marketers, Agents and Brokers in sourcing obligors and Contractual Liability Insurance Policies (CLIP) / Service Contract Reimbursement Insurance Policy providers for their service contract, extended warranty, limited warranty and other warranty and maintenance programs.

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