At Lexington National Insurance Corporation, our extensive expertise lies in providing comprehensive insurance solutions tailored to the specific needs of original equipment manufacturers (OEMs), service contract providers, and obligors. We understand the intricacies of contractual liability insurance policies (CLIPs) and aim to demystify the jargon, empowering our customers to offer compliant and reliable products.

When it comes to CLIPs, it’s crucial to distinguish between two fundamental types: Failure to Perform (FTP) or “Insolvency” CLIPs, and Reimbursement or “First Dollar” CLIPs. While both types serve distinct purposes, they can be likened to the differing names used for a popular food item like a frankfurter or a hot dog—essentially two labels for the same underlying concept.

Failure to Perform (FTP) or Insolvency CLIPs provide essential coverage by compensating the purchaser of a service contract if the obligor fails to fulfill their obligations. These policies represent the minimum requirement stipulated by most state laws, ensuring that customers receive the services they have paid for, even if unforeseen circumstances prevent the obligor from performing as expected.

In contrast, Reimbursement or First Dollar CLIPs offer a different approach. These policies reimburse the service contract provider for every claim they pay out on valid claims. While some states mandate the use of Reimbursement policies exclusively, favoring this method over FTP, the choice ultimately depends on specific regulatory requirements and risk management strategies. Reimbursement policies can be advantageous for obligors seeking to shift the burden of potential losses to another party, such as an insurer like Lexington National or a captive reinsurer established to assume the risk.

Lexington National Insurance Corporation will consider writing CLIPs for all types of service contract providers, including vehicle service, ancillary products, and consumer goods. At Lexington National Insurance Corporation, we prioritize transparency and client support. We understand that the complexities of contractual liability insurance can be daunting. Our team of knowledgeable professionals is dedicated to assisting you at every step, providing the guidance necessary to make informed decisions.

Whether you have questions about CLIPs, require assistance with policy selection, or need help understanding state regulations, our expert staff is here to help. We encourage you to reach out to us at your convenience. By leveraging our industry expertise and commitment to customer satisfaction, we can help you navigate the intricacies of contractual liability insurance policies, ensuring your business remains compliant and protected.

In conclusion, understanding the nuances between Failure to Perform (FTP) or “Insolvency” CLIPs and Reimbursement or “First Dollar” CLIPs is vital when selecting the most appropriate policy for your business. By partnering with Lexington National Insurance Corporation, you gain access to our extensive knowledge and experience in the field of contractual liability insurance. We are here to support you, address your questions, and guide you through the complexities of CLIPs, ultimately helping you offer compliant and reliable products to your customers.