Lender's Single Interest Insurance, commonly known as Blanket VSI or LSI, protects a lender's interest in the collateral securing a loan when the borrower's required insurance on the collateral lapses or is canceled.
Coverage is provided on a blanket basis to loans originated on and after the policy's effective date and is extended to the credit union's existing portfolio.
Administration is simple. There is no requirement to track borrower insurance following loan closing to assure that coverage on the collateral remains in force. Loans that are secured by automobiles, motorcycles, watercraft, rec-vehicles, and other chattel-type property may be covered.
LSI is rated on a per-new-loan basis, which is a one-time charge at loan origination that is passed on to the borrower. It eliminates the expense and administration burden of tracking insurance on your loan portfolio while also reducing the disruptions that Collateral Protection Insurance (CPI) programs can create.
What Does LSI or VSI Cover?
LSI/VSI typically provides:
Physical Damage: Physical damage discovered upon repossession when primary physical damage coverage is no longer in force. Loan default and collateral repossession are required since coverage operates on a single interest basis only.
Skip/Conversion: The lender must make their normal effort to repossess the collateral. If unable to locate the collateral, a skip claim is filed. L&M then has 90 days to locate the collateral via skip tracers. If the collateral is not located, the claim will be settled on the lesser of the loan balance or the NADA retail value.
Instrument Non-Filing (E&O): Limited Errors & Omissions protection in title and UCC handling process.
Confiscation: Indemnifies the lender against direct loss sustained because of the confiscation or seizure of the collateral by federal, state, or local law enforcement officers or any public official.
Repossession Damage: Physical damage coverage for up to 90 days after repossession of collateral while in the care, custody, and control of the credit union.
This broad scope of protection reduces charge-offs and increases recoveries.
Key Benefits of LSI for Lenders
- Financed fee collected at loan origination
- Assumption of Coverage (standard policy) - Entire existing loan portfolio is covered at policy inception, except for loans already covered under CPI or loans more than 30 days delinquent
- Complete blanket coverage across all consumer loan collateral types
- Eliminates the need for insurance verification and binders at loan closing
- Smooth transition from CPI programs, with no data collection or conversion process
- Blanket Skip coverage for the entire portfolio, unlike CPI, which requires an active certificate for Skip coverage
- No contracts or restrictive marketing agreements required - if you are not happy with our service, you can cancel anytime
- No claims fees
- No insurance tracking or follow-up required - very member-friendly
- Simple administration with monthly loan & premium reporting
- No compliance issues, such as inflated premiums for unnecessary coverages, free tracking, or expense reimbursements
- No charged off force placed premiums
- No force placed conflict of interest
- CPI programs target the most vulnerable/underserved borrowers and can push them into repossession and charge off. LSI eliminates this issue.
- Streamlined Claims Process: Lee & Mason manages all claims in-house, making it easy for lenders to file and resolve losses quickly.
Lee & Mason: A Trusted Leader in LSI/VSI Coverage
As one of the pioneers of LSI/VSI coverage, Lee & Mason offers best-in-class protection tailored to the unique needs of today's auto lenders. Our solutions are:
- Licensed in all 50 states
- Backed by A-rated carriers
- Delivered with industry-leading claims and customer service
We provide full-service administration, including underwriting, policy issuance, premium collection, and claims handling. Plus, our advanced reporting tools and consultative support ensure your program runs smoothly.
Final Thought
If you're looking for a low-maintenance, high-impact way to protect your auto loan portfolio, Blanket LSI/VSI may be the answer. It's simple, scalable, and smart. And with Lee & Mason's decades of experience and deep product knowledge, you're in good hands.
