Vendor’s Single Interest Insurance

VSI Insurance protects a lender’s collateral interest in vehicle loans without requiring borrowers to maintain their own physical damage coverage. A single blanket premium — typically charged to the borrower at origination — covers physical damage, repossession costs, skip losses, and non-filing errors across the portfolio.

HFS clients have reduced annual net charge-offs by 10% to 18% and added 5 or more basis points to portfolio profitability.

What Does Vendor’s Single Interest Insurance Cover?

• Physical damage: This includes damage caused by events like fire, vandalism, theft, weather events, and accidents.
• Repossession costs: VSI can cover the costs associated with repossessing the collateral if the borrower defaults on the loan.
• Non-filing errors: It may cover losses resulting from the lender’s unintentional failure to properly file liens or other legal documents related to the collateral.
• Skip tracing: Some policies offer assistance in locating missing collateral in case of theft or abandonment.

What Does Vendor’s Single Interest Insurance Cover?

Blanket VSI coverage is placed at the portfolio level. Lenders charge a small premium to borrowers at loan origination — Under Regulation Z, the VSI premium is excludable from APR in most states when proper disclosures are made at origination — and that premium funds coverage for collateral losses that occur after repossession. Because coverage is blanket, there is no insurance tracking requirement and no per-loan administration. HFS has maintained consistent VSI rates for clients since as early as 2003, providing cost predictability through multiple rate and economic cycles.

Benefits of Vendor’s Single Interest Insurance for Lenders

Charge-Off Reduction

Clients have reduced annual net charge-offs by 10% to 18% after implementing VSI coverage — one of the most direct measures of portfolio loss performance.

Portfolio Profitability

VSI programs have added 5 or more basis points to portfolio profitability for HFS clients by recovering losses that would otherwise hit the income statement.

No Insurance Tracking

Because VSI is blanket coverage, lenders do not track individual borrower policies, send compliance notices, or manage lapses. That administrative burden is eliminated entirely.

Rate Stability

HFS has held VSI rates steady for clients through multiple economic cycles. Some clients have maintained the same rate since 2003.

The optimal Vendor’s Single Interest Insurance policy for a lender’s portfolio depends on various factors, including portfolio size and individual risk transfer goals. The seasoned experts at HUB Financial Services leverage their extensive experience in banking and insurance to tailor solutions that maximize collateral risk transfer while meeting the unique needs of each client.