A Contractual Liability Insurance Policy (CLIP) is a specific type of insurance that covers the liability of an insured party that is assumed in a contract.  While many examples exist for the use of a CLIP this site focuses on how a CLIP may be used for Service Contracts and Limited Warranties by Retailers, Dealers, Original Equipment Manufacturers (OEM) and various Service Contract Administrators, Providers and Obligors (Warranty Company).

Service Contract Example

As an example, when a consumer purchases a Service Contract (aka Extended Warranty) they are buying this coverage from a Service Contract Provider / Obligor).  The Service Contract Company provides the coverage and may then use a CLIP to provide a financial guarantee to "back" the Service Contract.   This financial guarantee may be required by a state regulation, a lender or the purchaser. 

Additional Service Contract Details

OEM Limited Warranty Example

A original equipment manufacturer (OEM) may also use a CLIP to underwrite some or all of its limited warranty provided to the consumer.  As an example, an OEM may wish to extend their normal limited warranty for competitive reasons but doesn't want to retain the "extension" liability on its balance sheet.

Additional Limited Warranty Details