The correct term depends on what you’re looking to accomplish. Navigating the different insurance policy terms can be confusing, as their meanings and applications often overlap. The fundamental foundation is the Contractual Liability Insurance Policy (CLIP) for all the variations.
These policies are used to:
- Satisfy a regulatory requirement
- Provide risk transfer
- Demonstrate financial backing
Here’s a summary of the various terms:
Contractual Liability Insurance Policy (CLIP)
Definition: Covers liabilities an insured party assumes in a contract.
Use: Guarantees obligations made under contracts, with varying conditions based on the program.
Service Contract Reimbursement Insurance Policy (SCRIP)
Definition: A policy that provides financial guarantees for service contracts.
Use: Protects consumers if a service contract provider cannot fulfill claims. Functionally similar to a CLIP.
Contractual Liability Reimbursement Policy (CLRP)
Definition: Similar to a CLIP, covering contractual liabilities through reimbursement.
Use: Primarily serves the same purpose as a CLIP.
Product Warranty Insurance (PWI)
Definition: Covers part or all of a manufacturer’s warranty term.
Use: Allows manufacturers to transfer warranty obligations to an insurer, often utilizing CLIP policies.
Product Guarantee Insurance (PGI)
Definition: Covers promises or guarantees associated with products or services, such as event cancellation.
Use: Similar to PWI, it is typically backed by a CLIP.
The term you should use depends largely on the specific context and purpose of the coverage you need. For broader contractual liabilities, CLIP is most appropriate. If you’re focused on service contract coverage, SCRIP would be the right term. For a warranty or to provide financial backing for a guarantee, refer to PWI or PGI, depending on the nature of the warranty or guarantee.
Policy Structures
In addition to the type of policies, there are various structures for these policies, including:
Full Coverage Policy
A Full Coverage Policy, also known as a Dollar One Policy, pays 100% of all claims out of the premium paid to the carrier.
Failure to Perform Policy
A Failure to Perform Policy (F2P) or Insolvency Policy only pays for claims if the company making the promise or guarantee fails to fulfill its obligations. This generally means the claim reserve trust fund is exhausted, and the company fails.
Excess Coverage Policy
A policy that pays once a claim threshold has been exceeded. This may be triggered after a deductible or self-insured retention has been reached.
For more information:
Visit https://meramecsecure.com or email [email protected] for more information.
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