Deal Pack Blog
Collateral Protection Insurance (CPI) Benefits and the Importance of Following up with Customer’s Insurance
We all know that a customer cannot leave the lot without having proof of insurance. However in today’s time anyone can call and activate insurance and drive away with no intention of keeping it. I have seen where customers just get insurance to get the car home and cancel it a few days later. This is why it is really important to do the follow up on insurance, especially in the BHPH industry where the dealership is also the lienholder. Remember, this is your collateral and it’s your job to follow up with your customer’s insurance companies and confirm they still have full coverage. Not only is this important to you as the dealer, it is also valuable for your customer. Remind the customer that if anything does happen they are now responsible for the full loan amount and if they keep their insurance active at least it will pay for a portion of the loan balance, in the event of an accident. In our DMS, Deal Pack Pro, you can go into the Insurance tab and run a report of all missing, expired or canceled insurances. At this point you can email customers or print letters reminding them to call in and update their insurance information.
If the borrower fails to purchase their own coverage, and is uninsured, the lender is left vulnerable to losses. There are insurance companies where you can pay for the insurance and pass the cost to the customer. This is a term called forced place insurance or Collateral Protection Insurance (CPI), which protects you as the lienholder. Upon signing a loan agreement, the borrower typically agrees to purchase and maintain insurance that must include comprehensive and collision coverage and list the lending institution as the lienholder. CPI can be added to a customer’s account from the inception of the loan or anytime the primary borrower becomes uninsured. Once they procure and provide proof of their own insurance again, it can be removed from their account.