Collateral Protection in California

Vehicle CPI

Collateral protection insurance (CPI) protects lender’s financial interests on their vehicle collateral.

Who needs it?

Any lender that finances or leases automobiles should utilize vehicle CPI to protect their financial investments.

Possible coverages

  • All risk of physical damage
  • Theft, vandalism and malicious mischief
  • Fire and falling objects (e.g. tree branch)
  • Weather perils (e.g. hail, lighting, flood)
  • Skip Coverage

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Collateral Protection California

What is vehicle CPI?

Auto lenders require borrowers to maintain comprehensive and collision coverages on their financed vehicles, but not all drivers do. Vehicle CPI covers the collateral when borrowers don’t carry the minimum required coverages on financed or leased vehicles. Because the insurance is specifically for protecting lenders’ financial interest, vehicle CPI often only provides physical damage coverages for the financed vehicle and not any type or level of liability insurance for the borrower.

Because vehicle CPI is so specialized, lenders should work closely with a knowledgeable agent when procuring a policy. Only a specialized agent, like QuieTrack, will be familiar with the details and nuances of these policies.

What lenders need vehicle CPI?

Most lenders that finance auto loans or leases should carry vehicle CPI as protection for their financial investments. This applies to loans for both personal and commercial vehicles, and it often includes lenders such as new car dealerships, used car dealerships, credit unions, banks, and other financiers.

What protections do vehicle CPI policies provide?

Vehicle CPI policies are primarily concerned with protecting against damage to financed or leased vehicles since the vehicle is the lender’s collateral securing the loan. Thus, most policies only provide physical damage coverages. This coverage guards against many causes of vehicle damage and only to the extent of the lenders interest in the vehicle (i.e the loan balance). Vehicle CPI does not protect any equity the borrower may have in the vehicle.

A knowledgeable agent will be able to explain the precise perils that a given vehicle CPI policy does and doesn’t cover.

Do vehicle CPI policies come with medical payments and liability coverages?

No. Vehicle CPI only provides physical damage coverages and does not satisfy the requirements of any state for financial responsibility including any type of liability coverage.

When do vehicle CPI policies’ coverages go into effect?

Vehicle CPI policies’ coverages normally go into effect when a borrower allows their insurance to lapse on a financed or leased vehicle. The lapse of coverage is communicated automatically from the insurer to the lender and their insurance tracking company vendor, and CPI coverage seamlessly begins to protect the lender of the uninsured collateral risk.

A lender will require the borrowers to show proof of their own physical damage insurance before CPI coverage is canceled and unearned premiums refunded.

Collateral Protection California

Who pays vehicle CPI policies’ premiums?

The premiums charged on vehicle CPI policies are generally paid by the borrower with the amount being automatically calculated and added onto the monthly payments. In most situations, borrowers can be charged these premiums because they agree to carry comprehensive and collision when signing their loan or lease.

How can a lender get vehicle CPI?

For help finding vehicle CPI, contact the insurance brokers at QuieTrack. Our experienced brokers are well-versed in these policies, and we’ll make sure you find effective coverage for your financed and leased vehicles.

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