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Everyone Qualifies For Collateral Protection Insurance.

What is Collateral Protection Insurance?


When you finance, your vehicle is used as collateral to secure your loan. Your car acts as a form of protection for your lender.

If you were to total your car, your lender wouldn't be able to sell it for enough to cover your loan balance. That's why your loan agreement requires you to maintain certain auto insurance limits. Usually, lenders require you to maintain a comprehensive and collision insurance policy. A CPI policy is your lender's way of fulfilling your insurance requirement if your insurance policy is cancelled.

CPI is also known as force-placed auto insurance, lien protection insurance and auto loan protection insurance.

When you finance, your vehicle is used

What is Collateral Protection Insurance?

November 6, 2019/0 Comments/in Uncategorized/by Hezi Moore

Collateral Protection Insurance (CPI) is insurance used by lienholders to protect themselves from financial loss. CPI is also known as force-placed insurance because this type of insurance is not sold to a customer, however, it can be placed on a vehicle when the borrower does not have physical damage (comprehensive and collision) coverage.

Each customer who buys a vehicle must sign a Point of Sale (POS) letter. This letter is an agreement that consists of the borrower agreeing to purchase and maintain insurance coverage, including comprehensive and collision coverage.

This agreement also requires the borrower to list the lending institution as a lienholder on the policy. If the borrower fails to honor this part of the agreement, the lender turns to a CPI provider to protect its interest against losses.

as collateral to secure your loan. Your car acts as a form of protection for your lender — if you default on your payments, your lender can repossess your car and sell it to recoup their losses.
If you were to total your car, your lender wouldn't be able to sell it for enough to cover your loan balance. That's why your loan agreement requires you to maintain certain auto insurance limits. Usually, lenders require you to maintain a comprehensive and collision insurance policy. A CPI policy is your lender's way of fulfilling your insurance requirement if your insurance policy is cancelled.
CPI is also known as force-placed auto insurance, lien protection insurance and auto loan protection insurance.

How does CPI work?

Force-placed auto insurance, or collateral protection insurance, is purchased by your lender when your auto insurance policy does not meet the requirements outlined in your contract. CPI provides the insurance that you need to satisfy your agreement and protects your lender by insuring your car against physical damage.

The policy also protects you as the driver. If you were to get into an accident without the proper car insurance in place, you could be responsible for paying for damage to the vehicle.

A CPI auto insurance policy will make sure that you're meeting the requirements set by your lender. Many times, the policy won't protect you as the driver. Lenders can purchase CPI policies that provide comprehensive and collision coverage to protect their investment and cover physical damage to the driver’s car. When you purchase full-coverage auto insurance, you have the option of including liability and medical coverage, which are important to protect you, your passengers and other parties in an accident.