Contractual Liability Insurance Policy

Contractual Liability Insurance Policy CLIP


Solutions for Service Contract Providers to satisfy compliance and lender requirements and OEMs seeking Product Warranty Insurance.

What is a Contractual Liability Insurance Policy CLIP?

While the states generally recognize a service contract as a non-insurance product, they have other requirements that a provider (aka Obligor) must 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, 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 over $100m (or other amount) or a Contractual Liability Insurance Policy CLIP sometimes referred to as a Service Contract Reimbursement Insurance Policy SCRIP.

Here are 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 regularly:


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 state's requirements.

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.

Lenders often require a Contractual Liability Insurance Policy CLIP / Service Contract Reimbursement Insurance Policy SCRIP to satisfy their requirements before they 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.

Product Warranty Insurance

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

For a one-time payment, a Limited Warranty can be extended to provide coverage for up to 10 years after the OEM (or seller) retains a short period, typically the original Limited Warranty period. This solution allows companies to offer a longer Limited Warranty and transfer the excess risk off their balance sheet to an insurance carrier for a one-time cost. The company can still retain the customer claim experience so the customer doesn't have to deal with different experiences based on when a claim occurs, and the OEM doesn't have to pay a third party to administer claims.

Meramec Secure℠ assists OEMs, Dealers, Retailers, and Marketers in sourcing Contractual Liability Insurance Policies (CLIP) or Service Contract Reimbursement Insurance Policy providers for their service contract, extended warranty, limited warranty and other warranty programs.

Visit Meramec Secure's website for more information or email us.