SCRIP Insurance for Service Contract Providers
Forming your own Service Contract Company

If you have explored forming your own Service Contract Company (aka Service Contract Provider) you have likely noted the requirement from many states to address the financial guarantee you will utilize to "back" your service contracts. A financial guarantee is one of several elements of a Service Contract Process.

Financial guarantees generally, but not always, allow for three methods:

  • 1) Posting a defined percentage (40% on average) of the gross retail price the consumer pays as security in a claims reserve account.

  • 2) Providing a corporate guarantee from an entity (i.e. parent) with net equity generally in excess of $100 million.

  • 3) Utilizing a Service Contract Reimbursement Insurance Policy SCRIP (sometimes referred to as a Contractual Liability Insurance Policy or CLIP).

The National Association of Insurance Commissioners defines a Reimbursement Insurance Policy as:

"A policy of insurance issued to a provider and pursuant to which the insurer agrees, for the benefit of the service contract holders, to discharge all of the obligations and liabilities of the provider under the terms of the service contracts in the event of non-performance by the provider. “All obligations and liabilities” include, but are not limited to, failure of the provider to perform under the service contract and the return of the unearned provider fee in the event of the provider’s unwillingness or inability to reimburse the unearned provider fee in the event of termination of a service contract."

In a few states, a Service Contract Reimbursement Insurance Policy SCRIP is the only viable option available to comply with the state's requirements. It is also important to note that Bonds will not satisfy the Reimbursement Insurance Requirement, the required specific policy is needed. Failure to comply with these requirements may put a service contract provider out of compliance or prevent them from operating. Also, state level requirements vary by product type: Home Warranty, Consumer Products, Automotive for example.

If you need assistance with finding a compliant Service Contract Reimbursement Insurance Policy please contact:

Michael Frosch, Principal of Personal Safeguards Group, LLC. If you are an OEM, Dealer, Retailer, Marketer, Agent or Broker trying to source an obligor and/or Service Contract Reimbursement Insurance Policy please email Mike Frosch for immediate support.



Click to view a brief presentation outlining Service Contract Reimbursement Insurance for a Service Contract Company.





Click to build a rate for a service contract or limited warranty by entering a few pieces of information. You can develop a rate using a model similar to how carriers and providers develop rates.


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You should seek guidance and advice from your own legal and accounting resources.