Lenders single interest insurance exists to protect those who loan money for a living from financial loss. Having this type of insurance also helps increase business by allowing lenders to do business with borrowers they might otherwise consider too risky. Here is information about what this type of insurance is and what it covers.
What Does Single Interest Mean?
In the world of insurance, the word interest signifies an entity’s legal right to or share of something. Thus, single interest insurance refers to a policy that protects only one party involved in a legal agreement or relationship.
What Is Covered?
The target of lenders single interest insurance is any high-value item a borrower uses as collateral for a loan. For example, the cost of repair or replacement of the following items is covered:
- Recreational vehicle
- Other equipment
It is legal in some states for lenders to require borrowers to purchase single interest insurance. For example, you might require someone with a low credit score to insure their collateral in this way.
Having a policy to cover items used as collateral makes good business sense, especially when the premium can be passed on to the borrower. For this reason, many lenders make single interest insurance a requirement.