Coverage and Limitations of CPI

What is CPI?

Creditor Placed Insurance, or CPI, is a commercial insurance policy that protects a creditor’s lienholder interest in financed collateral against the risk of physical damage. Financed collateral can only be placed on a CPI policy and charged to the customer when the customer fails to provide or maintain their own insurance. To clarify: CPI is not sold to or purchased by the customer. CPI is only placed in response to the customer’s decision not to insure the collateral.

CPI Coverage

Most CPI policies extend extremely broad “All-Risk” coverage. There are a few exclusions, but almost anything that can damage a vehicle, or make it disappear, is covered.  Policies typically pay for the cost of repairing a damaged vehicle. Total losses are often settled at the lesser of the Actual Cash Value of the vehicle or the unpaid balance of the credit obligation.   

One of the great advantages of CPI is the claim processing time. CPI claims commonly settle much faster than personal auto insurance claims, often within a single week.    

CPI Limitations

It is imperative a creditor who uses CPI understand and communicate its limitations to customers. CPI is not “replacement auto insurance.” It is physical damage coverage only. CPI is not liability insurance coverage for the customer and may not be used to renew tags or show evidence of financial responsibility to law enforcement in the event of an accident or traffic stop. A CPI policy provides no direct insurance coverage for the customer. All claim settlements are made directly to the creditor. Of course, the customer does enjoy the indirect benefit of the claim payment, which the creditor is obligated apply to the customer’s account or toward the cost of repair.   

CPI is an effective risk management tool for BHPH operators and special auto finance companies. Call or email us to find out if CPI is right for your portfolio.