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Insurance Solutions for Contractual Liabilities
URM specializes in CLIP Insurance for businesses that make promises and need to protect them.
Service Contract
Providers
Protect against the cost of repairs, replacements, and service obligations.
Reduce Financial Risk
Transfer performance risk and limit balance sheet exposure.
Meet Requirements
Satisfy Contractual, regulatory, and lender requirements.
Strengthen Confidence
Stand behind your promises with an A-rated insurance policy.
Attorney-Broker Team
Legal insight and insurance placement experience in one advisory process.
Specialized Solutions
CLIP, extended warranty, service contract, captive, fronting, and admitted-market structures.
Top Tier Carriers
Access to rated insurers, fronting carriers, reinsurers, and specialty markets.
Aligned with your Goals
Designed around your contracts, regulatory obligations, economics, and customer promise.
When?
A contractual liability insurance policy (CLIP) is often used for contractual obligations that are measurable, recurring, and economically significant.
Common CLIPs back:
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Warranties
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Service credits
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Refund obligations
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Performance guarantees
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Tenant default obligations
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Delivery guarantees.
Why?
To support regulatory compliance, reduce trapped capital, improve customer confidence, or create a more scalable commercial program.
More?
For a foundational explanation of what CLIP insurance is and what a contractual liability insurance policy covers, see our full CLIP Insurance Guide.
CLIP Insurance vs Traditional Business Insurance
Traditional business insurance usually responds to third-party claims involving negligence, bodily injury, property damage, professional errors, cyber events, or management liability.
CLIP insurance is different. It is designed around a defined contractual payment obligation.
That distinction matters because many companies assume their existing insurance program covers contractual promises made to customers, partners, tenants, or counterparties. In many cases, it does not.
This is why companies offering warranties, service contracts, service credits, refund obligations, performance guarantees, or tenant default programs often explore CLIP structures separately from General Liability, E&O, Cyber, or D&O coverage.
A CLIP is designed to cover specific, measurable contractual obligations, and the key issue is whether the payment trigger can be clearly defined, modeled, priced, and transferred into an insurance structure.
Without these qualities, the CLIP is very difficult for actuaries to analyze and for insurers to underwrite.
The most common CLIP structures include the following, but in practice can be tailored for many measurable obligations.
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Refund or rebate obligations
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Service credits or SLA credits
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Warranty or extended warranty obligations
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Repair, replacement, or make-whole obligations
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Tenant default or rent payment obligations
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Delivery, logistics, or fulfillment guarantees
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Performance guarantees tied to defined contract language
Traditional General Liability, Professional Liability, E&O, Cyber, and D&O policies are not built to insure ordinary contractual payment commitments.
Warranty and Extended Warranty Programs
A manufacturer, retailer, or service provider offers repair, replacement, refund, or make-whole obligations tied to product performance or service failure. A CLIP structure may help transfer part of that obligation into an insurance program rather than leaving the exposure entirely on the company’s balance sheet.
Service Contracts and Maintenance Obligations
A company sells a service contract requiring it to perform future repairs, replacements, maintenance, or reimbursement obligations. Depending on the structure and state regulatory framework, insurance may help support financial responsibility requirements and reduce reliance on trapped reserves, trust accounts, or surety bonds.
Performance Guarantees
A company promises a measurable outcome, such as uptime, savings, delivery timing, system availability, or another defined performance metric. If the trigger is objective and the payment obligation is clearly stated, the exposure may be evaluated for a CLIP structure.
Refund, Rebate, or Credit Obligations
A fintech, SaaS, marketplace, or infrastructure company agrees to provide refunds, rebates, credits, or other financial remedies if defined contract conditions are not met. CLIP can help evaluate whether those obligations are insurable, particularly when the exposure is repeatable and supported by data.
Logistics, Delivery, and Fulfillment Guarantees
A logistics, e-commerce, or fulfillment platform promises reimbursement, replacement, or credits if goods are lost, damaged, delayed, or otherwise fail to meet defined delivery standards. These structures require careful wording because consumer-facing promises can raise insurance, warranty, or service contract regulatory issues.
CLIP Feasibility Checklist
A Contractual Liability Insurance Policy is not selected in the abstract. The structure depends on the promise being made, the party standing behind it, the sales channel, the claims process, and the data available to underwrite the obligation.
Before evaluating the type of CLIP or insurance-backed structure, a company should be able to answer the following questions.
1. What is the contractual promise?
Is the company promising repair, replacement, refund, reimbursement, service credit, loss payment, performance, uptime, savings, availability, delivery, tenant payment, or another defined outcome?
The more objective the promise, the easier it is to evaluate. Vague customer commitments are harder to insure than obligations with measurable triggers, limits, and claims procedures.
2. Who is the obligor?
Who is responsible to the customer or counterparty if the covered event occurs?
The obligor may be the insurer, manufacturer, retailer, dealer, service contract provider, platform, program sponsor, or another legal entity. The obligor structure affects regulatory treatment, claims payment, financial responsibility, data ownership, and whether reimbursement insurance, a CLIP, a fronted program, or captive participation may fit.
3. How is the obligation sold or attached?
Is the obligation embedded in the product sale, sold at point of sale, offered through a dealer or retailer, marketed post-sale, triggered through product registration, sold B2B, or included in a platform agreement?
The sales channel affects attachment rate, customer data, adverse selection, fraud controls, and the quality of the risk pool.
4. What is the expected volume?
Underwriters will need to understand annual product volume, contract count, transaction count, average selling price, average contract price, premium or fee opportunity, expected attachment rate, contract term, and geographic distribution.
A small exploratory program may require a different structure than a mature program with credible exposure and claims history.
5. What claims or loss data exists?
Relevant data may include historical claims, paid losses, loss summaries by year, frequency and severity trends, contract counts, cancellations, refunds, reserves, large losses, complaint history, recall or defect issues, and known drivers of loss.
A lack of historical data does not automatically make a program impossible, but it changes the underwriting approach. New programs usually require more conservative assumptions, tighter eligibility rules, and clearer claims controls.
6. Who handles claims and repairs?
The claims process matters as much as the promise.
Who validates eligibility? Who approves claims? Who pays the customer, dealer, repair network, or service provider? Are repairs handled in-house, through an administrator, through a dealer network, or through third-party service providers? Are claim costs capped, scheduled, reimbursed, or adjusted?
Weak claims administration can turn a good contractual promise into a poor insurance risk.
7. What financial structure is the company trying to achieve?
The goal may be risk transfer, regulatory compliance, partner confidence, balance-sheet protection, replacement of an existing carrier, expansion into new states, captive participation, retained underwriting economics, or simply exploration.
The intended business outcome should be clear before selecting the structure.
8. What supporting materials are available?
Useful materials include customer terms and conditions, service contract forms, warranty language, product lists, price/spec sheets, sales materials, claims history, loss runs, administrator agreements, repair procedures, reserve information, and any existing insurer, obligor, or TPA agreements.
These materials help determine whether the obligation should be structured as reimbursement insurance, a CLIP, a fronted program, a captive-backed program, a third-party obligor structure, or another risk-financing arrangement.
Bottom Line
A CLIP is most viable when the contractual promise is specific, the obligor is clear, the sales channel is understood, claims can be validated, expected losses can be modeled, and the company can produce enough data to support underwriting.
The better the program data and claims controls, the more options the company may have.
Types of CLIPs
Not every CLIP is structured the same way. The right structure depends on who is being protected, how the contractual obligation is triggered, whether the exposure is consumer-facing or commercial, and whether reserves, collateral, or captive participation are part of the program.
In practice, most CLIP programs fall into three broad categories.
1. Full Reimbursement CLIP
A reimbursement CLIP is designed to reimburse the company that made the contractual promise or guarantee.
This structure is commonly used when the company remains responsible to its customer under the contract, but wants insurance to respond after a covered contractual obligation is triggered.
Examples may include warranty obligations, service contract liabilities, defined refund obligations, or repair and replacement commitments.
In this structure, the customer is not the policyholder. The company remains the obligor, and the policy reimburses the company according to the terms, limits, exclusions, and trigger language in the policy.
2. Failure-to-Perform CLIP
Some CLIP structures are designed so that a customer, counterparty, or other beneficiary receives protection when the insured company fails to meet a defined contractual obligation.
These structures require more careful legal and regulatory review because they can implicate insurance distribution, service contract, warranty, consumer protection, or unauthorized insurance rules.
They may be relevant where a company wants to offer an “insured” or “backed” guarantee, but the structure must be designed carefully. The wording, marketing, policyholder, beneficiary, and claims process all matter.
This is where an admitted carrier, fronting arrangement, or other regulated insurance structure becomes important.
3. Excess-Coverage CLIP
An excess or collateralized CLIP is used when a company retains part of the risk through reserves, trust accounts, escrow, deductible layers, or captive participation, while transferring excess or tail exposure to an insurer or reinsurer.
This structure may be useful when the company already has predictable expected losses but wants protection against volatility above a defined attachment point.
It can also be relevant where regulators, counterparties, or enterprise customers require evidence that obligations are supported by insurance rather than only by the company’s balance sheet.
Unlike traditional liability policies, the claim does not always begin with a lawsuit.
A CLIP claim begins with a defined contractual trigger.
In many structures, the relevant event is the company’s obligation to provide a refund, credit, reimbursement, repair, replacement, or other financial remedy under a covered contract.
CLIP Claims Process
Step-by-Step CLIP Claim Flow
1. Contractual Trigger:
A covered event occurs under a customer contract, service agreement, warranty, guarantee, or similar obligation.
2. Proof of Obligation
The insured shows the contractual provision, triggering event, customer request, payment calculation, and supporting documentation.
3. Claim Submission
The company submits the claim to the CLIP carrier according to the policy’s notice and reporting requirements.
4. Carrier Review
The insurer reviews whether the event falls within the policy’s covered obligations, limits, exclusions, waiting periods, deductibles, and other terms.
5. Reimbursement or Covered Payment
If the claim qualifies, the policy reimburses or pays according to the structure of the CLIP program.
Key Point
A CLIP claim is usually not about proving negligence. It is about proving that a covered contractual payment obligation was triggered and properly documented.
CLIP Applications by Industry
Contractual Liability Insurance (CLIP) structures will look different depending on the industry, regulatory framework, customer relationship, and type of contractual trigger.
When CLIP Insurance May Not Be the Right Fit
A CLIP structure is not an option when the obligation is vague, discretionary, unmeasurable, intentionally triggered, or driven by ordinary business failure rather than a defined fortuitous event.
Potential problem areas include:
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Broad indemnity obligations with no clear payment trigger
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Open-ended promises to satisfy customers
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Guarantees tied to market demand, credit risk, or business performance
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Obligations that cannot be modeled or priced
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Customer-facing “insured” marketing without a properly licensed structure
The strongest CLIP candidates usually involve obligations that are specific, repeatable, data-supported, and clearly documented in contract language.
How URM Evaluates and Structures CLIP Programs
URM evaluates CLIP opportunities through a legal, insurance, and financial lens.
The process typically includes:
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reviewing the contractual promise or customer-facing guarantee
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identifying the actual payment trigger
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determining whether the obligation is measurable and insurable
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evaluating regulatory, warranty, service contract, or insurance-distribution issues
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identifying whether an admitted carrier, fronting carrier, captive, reinsurer, or collateralized structure is appropriate
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aligning the policy wording with the contract language
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building a claims process that works commercially, not just technically
The goal is not simply to “buy insurance.” The goal is to determine whether a contractual obligation can be converted into a durable insurance-backed structure.
CLIP Insurance FAQs
What is CLIP insurance?
CLIP insurance, or Contractual Liability Insurance Policy coverage, is designed to address defined contractual payment obligations that are not typically covered by traditional liability policies.
What does a Contractual Liability Insurance Policy cover?
A Contractual Liability Insurance Policy may cover defined obligations such as refunds, credits, warranties, service guarantees, repair or replacement obligations, tenant default obligations, or other measurable contractual payment commitments.
Is CLIP insurance the same as general liability insurance?
No. General Liability insurance usually responds to bodily injury, property damage, and certain third-party liability claims. CLIP insurance is structured around defined contractual payment obligations.
Can CLIP insurance cover warranties or service contracts?
Potentially, yes. Warranty and service contract obligations are common areas where CLIP structures may be evaluated, especially where the obligation is measurable and supported by contract language.
Can CLIP insurance reduce reserve requirements?
In some cases, insurance-backed structures may help reduce reliance on reserves, trust accounts, or other financial responsibility mechanisms. The result depends on the state, regulatory framework, and program structure.
Is CLIP insurance regulated?
The insurance policy is regulated like other insurance products, and some CLIP use cases may also implicate state warranty, service contract, consumer protection, or unauthorized insurance rules.
Who buys CLIP insurance?
CLIP insurance is typically evaluated by companies offering warranties, service contracts, performance guarantees, refund obligations, tenant default programs, logistics guarantees, embedded protection products, or other contractual payment commitments.
How is CLIP different from a surety bond?
A surety bond generally guarantees performance to a third party. CLIP insurance is typically structured as an insurance policy responding to defined contractual obligations, often reimbursing or paying according to policy terms.
