Collateral Protection Insurance
Did you know that 1 in 7 drivers in the U.S. are uninsured?
What is Collateral Protection Insurance.
Collateral Protection Insurance (CPI) insures an asset (automobiles, heavy equipment, RV’s, boats, farm equipment, mobile homes) held as collateral for loans by lenders. CPI is a single interest insurance plan that protects the Lender/Creditor if the Purchaser/Debtor fails to insure a vehicle from physical damage. The Debtor may provide their own insurance and maintain it or they may choose to accept CPI made available by the Creditor.
Why Do You Need to Offer Collateral Protection Insurance ?
- Protects your asset;
- All but eliminates uninsured motorist loss;
- Greatly reduce repossessions and charge-offs;
- Reduced operating costs associated with monitoring collateral insurance.
Offering Buy-Here Pay-Here customers Collateral Protection Insurance as an alternative to the more expensive physical damage insurance, saves the customer money and provides dealers with an additional, substantial revenue stream - without adding any additional risk.
Illustration: A dealership adding 10 customers per month at a 24 month term with a $90.00 monthly premium and experiencing average claims, will net over $65,000.00 in it's reinsurance company after the first year and over $225,000.00 after year two.
You can offer CPI at time of sale for much less than your Customer can purchase from an insurance company. Creditors have to prove that they have current automotive insurance upon purchase of a vehicle, but can drop their insurance at anytime; leaving the Debtor’s asset vulnerable.
What is “Forced-Place” Insurance.
After notice that the Debtor
has lost his/her insurance plan, the Creditor can “force-place” insurance coverage on their asset. CPI is added to the principal balance of the retail installment contract and reimbursed by the Debtor. Federal and State Courts view force-placed CPI as a contractual right of the Creditor agreed to by the Debtor.
Is Collateral Protection Insurance for Buy-Here Pay-Here Operations.
Most BHPH and LTO dealers require their customers to carry full coverage insurance for the term of the loan. BHPH customers are often challenged by the process of qualifying for, maintaining and paying for physical damage insurance. Credit scores are a factor with many insurers and often those customers that can afford it least are paying the most for physical damage coverage. Thus, BHPH customers have a high frequency of lapses in coverage - exposing the dealer in the event of a loss.
How is Collateral Protection Insurance Good for Your Customers.
Your staff remains in-good standing with the customer because your staff doesn’t have to chase your customers to verify insurance. Our service does that for you. Also, if at any time your customer purchases insurance from another source, the CPI insurance stops and a refund is issued where applicable.
CPI insurance is often less expensive than insurance your customer can obtain. Most BHPH customers will have to pay a large upfront payment (around $150) then pay monthly payments to the insurance company. With CPI, your customers will pay a small set-up fee, then make small payments ($75 - $90 a month) keyed to the frequency of their regular loan payments.
Collateral Protection Insurance is Not.