What Is Blanket VSI Insurance and How Does It Protect Lenders?

What Is Blanket VSI?

Blanket VSI—also known as Vendor's Single Interest (VSI) or Lender’s Single Interest (LSI)—is designed to protect lenders when a borrower’s vehicle or other collateral becomes uninsured and is damaged, stolen, or unrecoverable. In this article, we’ll cover what Blanket VSI coverage includes, its key benefits for lenders, and the types of loans and collateral that can be protected.

This insurance solution helps financial institutions safeguard their consumer loan portfolios without the need to track individual borrower insurance policies after loan closing. The blanket nature of a Blanket VSI policy eliminates the need for lenders to track borrower insurance, send warning notices, or force-place costly CPI coverage after loan closing. Lenders simply verify and secure primary insurance at the time of loan origination.

Once the Blanket VSI policy takes effect, coverage automatically extend to all existing and future loans—providing peace of mind that the lender’s financial interest in the collateral remains protected, even if a borrower cancels, fails to renew, or allows their insurance to lapse. As a streamlined alternative to Collateral Protection Insurance (CPI), Blanket VSI enhances loan servicing efficiency, safeguards the lender’s interest in the collateral, ensures regulatory compliance, and mitigates financial risk.

What Does Blanket VSI Insurance Cover?

Blanket VSI insurance provides single-interest protection across a lender’s entire loan or lease portfolio. Unlike traditional insurance tracking programs, Blanket VSI automatically protects the lender if a borrower’s insurance lapses—covering uninsured losses that occur before or after repossession.

This protection may also apply when a borrower absconds with the collateral or when repossession is delayed due to title or lien issues.

Most Blanket VSI policies include coverage for:

• • Uninsured damage or theft – Protects against loss when borrower insurance lapses.
  • Skip coverage – Covers situations where collateral cannot be located.
  • Security interest non-filing – Applies if repossession is prevented due to title or lien defects.
  • Superior lien issues – Covers errors or omissions in lien or title records.
  • Mechanic lien expenses – Pays for repair or storage fees owed to third-party facilities.
  • Repossession coverage – Extends protection against uninsured damage or theft after repossession.

Comprehensive Blanket VSI programs may also include coverage for commercial vehicles and equipment loans, though a Blanket Commercial Equipment policy is typically the better fit for lenders with diversified portfolios.

Benefits of a Blanket VSI policy for Lenders

A Blanket VSI policy provides financial institutions with several key advantages:

• • No insurance tracking required – Saves time and administrative effort compared to monitoring borrower compliance.
  • Reduced charge-offs – Protects the entire loan portfolio, minimizing uninsured losses.
  • Upfront premium options – In many states, lenders can disclose and charge VSI costs at loan origination, simplifying collection.
  • Compliance-friendly – VSI costs can often be passed to borrowers without impacting the loan’s interest rate or causing payment strain from high monthly CPI premiums.
  • Efficient risk management – Reduces the need for collateral protection programs (CPI) programs and enhances portfolio performance.

For lenders, Blanket VSI means consistent protection, lower administrative burden, and greater portfolio stability.

What Types of Collateral Are Covered Under Blanket VSI?

Coverage under a Blanket VSI policy applies to a wide range of consumer loans and titled collateral, including:

• • Cars, vans, and light trucks
  • Motorcycles, ATVs, and snowmobiles
  • Watercraft and jet skis
  • RVs, mobile homes, and more

This flexibility allows lenders and finance companies to protect nearly any form of UCC-titled collateral.

Why Blanket VSI Coverage Matters

A Blanket Vendor’s Single Interest (VSI) policy helps lenders manage risk more efficiently, minimize losses from uninsured collateral, and maintain examiner confidence and compliance. By eliminating the need to track borrower insurance, send lapse notifications, or force-place costly Collateral Protection Insurance (CPI), a Blanket VSI program creates operational efficiency, reduces human error, and ensures regulatory alignment—all while safeguarding a lender’s consumer loan portfolio against uninsured losses.

Whether you manage a community bank or regional credit union, Blanket VSI coverage provides a simple, cost-effective way to strengthen your loan portfolio and protect your bottom line.