CPI insurance is a type of car insurance that your lender can force you to buy if you don’t have enough coverage on your vehicle. CPI insurance is expensive, limited, and unnecessary. You should avoid it by maintaining your own car insurance policy that meets your lender’s requirements.
Understanding CPI Insurance
Definition and purpose of CPI insurance
CPI stands for collateral protection insurance. It is lender-placed insurance coverage that protects your vehicle against physical damage. Your vehicle is the collateral for your loan or lease. If you don’t have enough insurance on your vehicle, your lender can buy CPI insurance for you and charge you for it.
How it works and who it benefits?
CPI insurance works by covering the gap between your existing insurance and your lender’s requirements. For example, if your lender requires you to have comprehensive and collision coverage, but you only have liability coverage, CPI insurance will cover the difference. However, CPI insurance does not cover liability or medical expenses for you or other parties in an accident.
CPI insurance benefits your lender by ensuring that they can recover their losses if your vehicle is damaged or totaled. It also benefits you by preventing you from defaulting on your loan or leases if your vehicle is destroyed. However, CPI insurance is not a substitute for regular car insurance. It is a temporary and costly solution that you should avoid.
Coverage and Cost of CPI Insurance
What CPI Insurance Covers?
CPI insurance covers physical damage to your vehicle caused by collision, fire, theft, vandalism, or natural disasters. It does not cover liability or medical expenses for you or other parties in an accident. It also does not cover personal belongings in your vehicle or rental car fees.
Factors that Determine CPI Insurance Cost
CPI insurance cost depends on several factors, such as:
- The value of your vehicle
- The amount of coverage required by your lender
- The deductible amount
- The duration of the policy
- The risk of loss
CPI insurance is usually more expensive than regular car insurance because it has higher premiums, fees, and interest rates. It also has lower limits and higher deductibles than standard policies.
Differences Between CPI Insurance And Traditional Auto Insurance
The main differences between CPI insurance and regular auto insurance are:
- CPI insurance is purchased by your lender on your behalf, while regular auto insurance is purchased by you directly from an insurer.
- CPI insurance is added to your monthly loan or lease payment, while regular auto insurance is paid separately to your insurer.
- CPI insurance only covers physical damage to your vehicle, while regular auto insurance can cover liability, medical expenses, personal injury protection, uninsured/underinsured motorist coverage, and more.
- CPI insurance has higher premiums, fees, and interest rates than regular auto insurance.
- CPI insurance has lower limits and higher deductibles than regular auto insurance.
- CPI insurance is temporary and can be canceled once you have enough coverage on your vehicle, while regular auto insurance is ongoing and can be renewed or changed as needed.
- Pros and cons of CPI insurance
The Pros of CPI Insurance are:
- It protects your vehicle against physical damage in case of an accident or loss.
- It protects your lender against financial loss if your vehicle is damaged or totaled.
- It protects your credit by preventing you from defaulting on your loan or leases if your vehicle is destroyed.
The Cons of CPI Insurance are:
- It is expensive and adds to your monthly loan or lease payment.
- It does not cover liability or medical expenses for you or other parties in an accident.
- It does not cover personal belongings in your vehicle or rental car fees.
- It has lower limits and higher deductibles than regular car insurance.
- It can be canceled by your lender without notice if you miss a payment or violate the terms of your contract.
Conclusion: Is CPI Insurance Right for You?
CPI insurance is not right for anyone who wants to save money and have adequate coverage on their vehicle. CPI insurance is a type of forced car insurance that your lender can impose on you if you don’t have enough coverage on your vehicle. It is expensive, limited, and unnecessary. You should avoid it by maintaining your own car insurance policy that meets your lender’s requirements.
If you have CPI insurance on your vehicle, you can get rid of it by:
- Buying a car insurance policy that meets your lender’s requirements.
- Sending proof of insurance to your lender and requesting them to cancel your CPI policy.
- Asking for a refund of any unused premiums or fees that you paid for your CPI policy.
To find the best car insurance policy for your needs and budget, you can use a car insurance comparison tool like Jerry. Jerry is a free app that helps you compare quotes from multiple insurers and choose the best one for you. Jerry also helps you switch to your new policy and cancel your old one. With Jerry, you can save money and time on car insurance and avoid CPI insurance at all costs.
