How Investing in VSI Insurance Can Save Money in the Long Run

In today’s self-service society, many drivers may forego the insurance agent and simply quote a price for insurance online. Unfortunately for lenders, this trend toward DIY insurance arrangements can mean that borrowers are more likely to become uninsured or underinsured at some point during the repayment process, putting themselves and the lienholder at risk.

Vendor single interest (VSI) insurance can take the work and stress out of claiming damages to the vehicles in your auto loan portfolio. Below, we’re discussing how this product can streamline your collection process and save you money in the long run.

What Is VSI Insurance?

VSI insurance is a type of policy that is designed to cover a vendor’s total portfolio of vehicle loans, fully protecting against the risk of loss if a borrower fails to maintain appropriate insurance coverage at any time. This policy can include a range of different coverage provisions, from covering collateral physical damage to the automobile to conversion, repossession, or confiscation that could prevent the lender from physically recovering the vehicle. And best of all, it eliminates the need to track individual insurance coverage, freeing up significant time and money.

A few of the most common coverage types available under a Lee & Mason VSI policy include:

  • Collateral physical damage, which can include uninsured physical damage to the automobile or uninsured losses related to theft.
  • Security-interest non-filing, which provides coverage when a lender is unable to repossess a vehicle because of a title or lien registration defect.
  • Conversion or confiscation, which can prevent a lender from repossessing because the vehicle has been seized by the government or unlawfully sold to a faultless third-party.
  • Repossession coverage, which can protect the lender against loss due to theft or damage after the car has been repossessed.

How Can VSI Insurance Save You Money?

VSI policies can provide coverage throughout the term of the loan, providing a major bridge against risk for lenders. And in many cases, lenders can pass along the cost of VSI to the consumer during the loan underwriting process, making this coverage a no-brainer. By providing a hedge against any uninsured losses while requiring a minimal out-of-pocket commitment from the lender, VSI insurance can save significant money over the long term, especially when taking factors like legal expenses and enforcement costs into account.

Keep in mind that it’s important for lenders to always disclose this coverage and any related charges to borrowers, who may wish to waive it. You’ll also want to ensure that borrowers know that VSI insurance doesn’t protect them, but rather, the value of the lender’s collateral. By making these disclosures, you’ll be able to protect yourself against any legal claims the borrower may want to levy if they suffer an uninsured loss.

Other types of insurance, like blanket lenders single interest (LSI), can provide similar levels of coverage for lenders looking to add some additional protections to their auto loan portfolios. 

Contact Lee & Mason to learn more about VSI, blanket LSI, and the other products we offer. Our knowledgeable representatives are here to help you weigh your options and make a decision that best suits your needs.