Collateral Protection Insurance (CPI)

Collateral Protection Insurance (CPI), also known as force-placed insurance, is a policy a lender places on a financed vehicle when the borrower's required coverage has lapsed. The cost is added to the borrower's loan. CPI protects the lender's interest but does not cover the borrower's liability or personal property.

For BHPH and subprime dealers who carry in-house paper, CPI is a risk management tool that protects the portfolio when borrowers fail to maintain coverage. Understanding when and how to apply CPI, and the notification requirements involved, is part of compliant portfolio management.