Table of Contents

Single Interest Insurance: What It Is, How It Works, Benefits

By

澳洲幸运5官方开奖结果体彩网:Elizabeth Blessing

Updated January 31, 2022

Reviewed by

Anthony Battle

Fact checked by

Michael Logan

What Is Single Interest Insurance?

Single interest insurance—also known as vendors single interest insurance or VSI insurance—covers the interests of one of the two parties that co-own a property. This type of insurance typically covers a portion or all of the outstanding value owed to a lender for mortgaged or leased property.

Single interest insurance generally applies only to the interests of a lender or 澳洲幸运5官方开奖结果体彩网:financing company. VSI insurance is structured to protect the interests of the lender but not the borrower of home, auto, or other consumer loans. While the lender may pass the cost of the VSI premiums to the borrower, the borrower receives no protection in the event the 澳洲幸运5官方开奖结果体彩网:collateral (such as a car or♔ home) is destroyed or damaged.

Key Takeaways

Single interest insurance, also known as vendor single interest insurance or VSI insurance, protects the lender but not the borrower of home, car, or other consumer loans.
Single interest insurance covers the loss or damage of a loan's collateral, which is the underlying high-value asset such as a car, boat, or home.
In the United States, some states allow the lender to pass the cost of a VSI insurance policy to the borrower, who may be required to purchase the insurance in order to receive a loan.
Lenders might opt for blanket coverage on their VSI insurance policy, which offers broad coverage options for their entire consumer loan portfolio.
This coverage might include skip account protection, theft protection, errors and omissions coverage, and repossession coverage.

Understanding Single Interest Insurance

In most cases, single interest insurance covers damage to or loss of a loan's 澳洲幸运5官方开奖结果体彩网:underlying asset. Often, it also includes the lender's cost of repossessing that asset, if necessary. Financing companies that lend to customers with marginal or poor credit sometimes require this type of coverage to insure against the cost of customer default. Some states permit lenders to pass the cost of the policy's 澳洲幸运5官方开奖结果体彩网:insurance premium to the borrower.

Benefits of Single Interest Insurance

The vast majority of single interest insurance policies cover the lender's interest in vehicles and other high-value 澳洲幸运5官方开奖结果体彩网:personal property, such as pleasure boats and watercraft. Single interest insurance policies commonly offer 澳洲幸运5官方开奖结果体彩网:gap coverage, which reimburses lenders for the difference👍 between the value of the asset and the outstandin🐼g loan principal.

Lenders might opt for 澳洲幸运5官方开奖结果体彩网:blanket coverage, which offerꦇs broad coverage for their entire consumer loan portf🐈olio. Instead of following up on and tracking individual policies, blanket coverage enables lenders to reduce their administrative costs. Coverage options might include:

澳洲幸运5官方开奖结果体彩网:Skip account protection to reimburse the expense of tracking down default borrowers
Theft protection to cover assets which may be damaged or stolen
Repossession coverage to offset the costs and damages incurred during the repossession process
Lien coverage to protect against 澳洲幸运5官方开奖结果体彩网:errors and omissions on title paperwork

Important

Lenders may also require single interest insurance for borrowers who do not have𒁃 a credit score low enough to deny the loan but do not have a strong score or much credit history.

Single Interest Insurance and Buying Vehicles

Most states require drivers to provide proof of automobile insurance before they will allow them to drive a vehicle legally. Likewise, financial service companies typically need proof of insurance before underwriting an automobile loan. If for some reason a buye🌠r cannot show proof of iꦅnsurance when purchasing the vehicle, the finance company might require that the buyer purchase vendor single interest insurance.

A finance company also may request single interest coverage if the borrower's credit history is weak or lacking, making default more likely.

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