Collateral Protection Insurance

Collateral protection insurance (CPI), also known as creditor-placed insurance or force-placed insurance, helps lenders and financial institutions protect collateral when borrower insurance coverage lapses. It supports risk mitigation, regulatory compliance, and portfolio performance by ensuring continuous coverage on secured assets.

Collateral protection insurance (CPI) is a lender-placed insurance policy used when a borrower fails to maintain required coverage on collateral for the duration of the loan. It protects the lender’s financial interest by ensuring the asset remains insured against damage or loss.

What is Collateral Protection Insurance?

Collateral protection insurance (CPI), also known as CPI insurance or lender-placed auto insurance, is a policy a lender may obtain when a borrower’s required auto insurance coverage is canceled, lapses, is not renewed, or is deemed insufficient. It is designed to protect the lender’s financial interest in a vehicle used as collateral for an auto loan.

Unlike Vendor’s Single Interest (VSI) insurance, CPI programs require lenders to actively monitor borrower insurance coverage and force-place a policy when a lapse is identified. Because of this, CPI is often paired with Auto Insurance Tracking services, which help detect coverage gaps and reduce administrative burden.

When coverage is force-placed, it ensures the collateral remains protected against physical damage or loss caused by covered perils. Depending on the loan agreement, the cost of CPI may be passed on to the borrower.

CPI plays an important role in auto lending by helping financial institutions maintain continuous coverage, support regulatory compliance, and reduce exposure to uninsured losses across their portfolios.

  • Features

  • Benefits

  • Coverages

  • Risk Mitigation: One of the primary benefits of a CPI program is that it helps safeguard a lenders financial interest by providing protection against potential loss or damage on collateral.

  • Enhanced Loan Portfolio Management: CPI programs can contribute to the overall performance of a lender's loan portfolio leading to better risk management and reduced uninsured losses.
  • Customization Options: CPI programs often offer lenders flexibility and the option to customization the program to meet their specific needs.
  • Claims Processing Support: lenders have the support of a knowledgeable claims team to help navigate the insurance claims process efficiently and effectively.
 
 
 
 
 
 
 
 
 
  • Helps reduce the risk of losses on uninsured collateral.

  • CPI premiums may be passed onto the borrower.
  • Dual Interest Coverage: Both the lender and borrower have coverage under the policy.
  • Claims Process: a simplified claims process with repossession not required to file a claim.

  • Allows lenders to easily manage coverage with online ordering and the ability to instantly bind coverage.
 
 
 
 
 
 
 
  • Dual Interest: Provides coverage for both the lender and the borrower which means repossession is not required to file a claim.

  • Physical Damage: provides All-Risk coverage for uninsured damage up to the policy limits.
  • Automatic Coverage: allows a lender to file a claim when a Notice of Insurance is not issued due to inadvertent error or omission.
  • Repossessed Collateral: provides coverage on eligible collateral for up to 90 days after repossession.
 
 
 
 
 
 
 
 
 

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Collateral Protection Insurance FAQ's

How does Collateral Protection Insurance (CPI) work?

Under a Collateral Protection Insurance (CPI) program, lenders typically track borrower insurance policies post-close for the duration of the loan. If a borrower’s insurance lapses, is canceled, or is not renewed, the lender initiates a force-placed CPI policy to protect the uninsured collateral. Lenders generally send a series of notices informing the borrower before placing coverage, and once applied, the premium is typically passed on to the borrower through their monthly payment. 

What does Collateral Protection Insurance cover?

A Collateral Protection Insurance (CPI) policy is typically dual-interest, providing physical damage coverage for collateral against risks such as fire, theft, collision, and other covered losses. While it may offer limited borrower protection, the primary purpose is to protect the lender’s financial interest.

When is CPI applied to a loan?

Collateral Protection Insurance (CPI) is applied when a borrower’s insurance policy lapses, is canceled, or does not meet the lender’s requirements. It is a reactive solution designed to restore coverage after a lapse is identified. 

How is CPI different from Vendor’s Single Interest (VSI) Insurance?

Collateral Protection Insurance (CPI) requires ongoing tracking of borrower insurance and is applied after a lapse occurs. In contrast, Vendor’s Single Interest (VSI) Insurance provides blanket portfolio coverage without continuous tracking. VSI is proactive, while CPI is reactive and applied at the individual loan level. 

What are the benefits of Collateral Protection Insurance (CPI)?

Collateral Protection Insurance (CPI) helps ensure continuous protection of collateral, supports compliance with lending requirements, reduces exposure to uninsured losses, and allows lenders to recover costs by passing premiums to borrowers when permitted.

Additional Collateral Protection Insurance Solutions for Lenders

Risk management solutions to protect loan portfolios, reduce coverage gaps, and simplify insurance tracking.

 
 
 
 
 
 
 
 
 
 
 
 
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Collateral Protection Insurance

Gain access to a user-friendly system which generates compliant warning letters and allows lenders to easily add, cancel and edit CPI coverage when necessary.

  • 2 Check Mark Website Add, Edit or Cancel Coverage Online
  • 2 Check Mark Website Automated Warning Letter Cycle
  • 2 Check Mark Website Physical Damage Coverage Included
  • 2 Check Mark Website Additional Coverage Available
  • 2 Check Mark Website Simplified Monthly or Annual Billing
GET STARTED WITH CPI

Vendor's Single Interest

 
 
 
 
 
 
 
 
 

A Blanket VSI policy eliminates the need to track insurance policies, send warning letters and force-place CPI coverage after loan closing. 

  • Check Mark Collateral Protection Insurance Alternative
  • 2 Check Mark Website Eliminates Insurance Tracking Post-Close
  • 2 Check Mark Website Provides Physical Damage Coverage
  • 2 Check Mark Website Additional Coverages Available
  • 2 Check Mark Website Simple Reporting & Remittance
LEARN MORE ABOUT BLANKET VSI

Auto Insurance Tracking

 
 
 
 
 
 
 
 
 
 

Outsource all the duties associated with opening insurance renewal mail, tracking insurance policies, sending warning letters and force-placing coverage.

  • 2 Check Mark Website Third-Party Insurance Tracking
  • 2 Check Mark Website Notifications Handled By Third-Party
  • 2 Check Mark Website CPI Coverage Placed When Needed
  • 2 Check Mark Website Transfers Risk of Non-Compliance
  • 2 Check Mark Website Access to Real-Time Online System
EXPLORE INSURANCE TRACKING

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