Skip Coverage

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The two most common kinds of claims that occur under a Blanket Single Interest (or Vendor Single Interest) insurance policy are Uninsured Physical Damage and Skip Coverage.

Uninsured physical damage claims are often discovered upon repossession of the vehicle. The recovered vehicle is found to be heavily damaged and the borrower’s own auto insurance policy has been canceled.

But what happens when the borrower and vehicle collateral cannot be found?…

Skip vehicle coverage claims arise when the borrower has stopped making payments on the auto loan and the borrower has disappeared, presumably disappeared with the vehicle collateral. After the lender has spent some time and effort (due diligence) trying to locate the borrower and the vehicle collateral, a skip coverage claim is filed with the insurance company. In recent years, skip coverage claims have risen. And an unrecovered skip vehicle can be large write-off loss, that’s why skip coverage is so important to auto lenders.

There are two forms of skip coverage, commonly referred to as Standard Skip and Broad Form Skip. Under standard skip coverage, after the skip claim is filed, the insurance company has sixty (60) days to locate either the borrower or the vehicle. Of course, locating the vehicle collateral and repossessing it, is the desired outcome. However, there are cases when the borrower can be located but he/she has hidden the vehicle and will not disclose the vehicle’s location. Under broad form skip coverage, the company has ninety (90) days to locate the vehicle. Only locating the vehicle (and hopefully facilitating immediate repossession) will close the claim.

While it’s nice for the lender to get a big claim settlement check when the company has not located the vehicle and borrower (or just the vehicle under broad form skip), it becomes a problem when too many skip vehicles are not being located (and recovered). A large number of unrecovered skip vehicles will likely lead to premium rate increases. That’s why doing business with high quality claims administrator like Lee & Mason Financial Services is important.  Lee & Mason prides itself on a high percentage of located skip vehicles. We locate the skip vehicles that should be found, and pay the claims in those situations when the vehicles are truly gone.