Contractual Liability Insurance

Service Contract, Limited Warranty, Specialty Programs

What is a Contractual Liability Insurance Policy (CLIP)

A Contractual Liability Insurance Policy (CLIP) covers the liability of an insured party assumed in a contract. Many examples exist for using a CLIP, including Service Contract, Limited Warranty, and other Guarantee solutions. Example uses of a CLIP include:

  • Retailers & Dealers
  • Original Equipment Manufacturers (OEM)
  • Service Contract Administrators
  • Service Contract Providers
  • Service Contract Obligors
  • Event & Trip Cancellation
  • Benefit Companies
  • Landlords (Deposit Waiver)
  • Repair Companies

A Contractual Liability Insurance Policy (CLIP) can be structured as a full-risk (dollar one) or failure-to-perform policy. It can cover single-payment, multi-year programs, or monthly subscription programs.
Service Contract CLIP

When consumers purchase a Service Contract (aka Extended Warranty), they buy the Service Contract from a seller that is or utilizes a Service Contract Provider / Obligor. The Service Contract Obligor 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.

Example Service Contract CLIP Solution
Manufacturer (OEM) Limited Warranty CLIP

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

Example Limited Warranty CLIP Solution
Specialty Products CLIP

A contractual liability insurance policy (CLIP) may be used for a wide array of specialty products and programs.

Example Specialty CLIP Solution
Example of How to Build a Price for a Contractual Liability Insurance Policy CLIP

Building a contractual liability insurance policy CLIP rate often utilizes a straightforward method involving four key pieces of information: frequency, severity, target loss ratio, and fees. This Rate Builder allows you to plug sample pieces of data to generate a sample rate. This is an example only and does not constitute an offer to sell or purchase insurance.

Example Rate Builder
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