Question: I was looking over the balance of my car loan and saw that it had a $3,000 debit with “Charge Assessment for CPI”” next to it. What does this charge mean?”
Answer: If you have a car loan or are leasing a vehicle, the lender typically requires that you have full coverage car insurance and collision coverage—not just the minimum required by the state you live in.
Collateral Protection Insurance, or CPI, is a type of car insurance that protects a lender in cases where a driver doesn’t have sufficient insurance coverage. In this form of force-placed insurance, the lender has the right to purchase CPI on your behalf if you fail to get the required coverage. It can potentially be more expensive than a policy you’d purchase yourself.
If you let your policy lapse or miss payments, that means that you don’t have active car insurance. This leaves the lender vulnerable, especially in the event that you have a car accident or its damaged in a weather-related incident. So even if it’s not intentional —maybe you didn’t make insurance payments, forgot to renew your policy, or didn’t get the required coverage as directed by the lender —a failure to pay CPI could result in your car being repossessed.
When you don’t own your car outright, the lender will seek financial protection for their collateral—so they use CPI to mitigate their risk. To implement CPI, the lender will notify the borrower, but how this procedure occurs usually varies from state to state. If you do receive such a letter, call your auto insurance agent and lender immediately to get the situation resolved.
In some cases, especially if an error was made, you can get this charge removed by showing proof of insurance. In situations when your coverage has ever become inactive or insufficient, you won’t be able to have the CPI charge removed from your loan. Your next move is to call your lender to explain the situation, though you may need to ask your insurance agent to communicate with the lender to help them verify that you do have the required coverage.
In the event that you purchase the required coverage after you’ve received a notice from your lender and there are no errors, you may still have to pay for CPI. Buying sufficient coverage after the fact will not eliminate what you owe for CPI when the car wasn’t properly insured.
Is there a way to avoid getting a CPI charge?
Staying on top of your car insurance and knowing what you need to be compliant will help you avoid getting hit with CPI. Take time to understand what car insurance coverage is required by your lender. Once you’ve purchased a car insurance policy that meets your lender’s requirements to stay compliant, make sure you pay your insurance premiums on time. And when your policy is up for renewal, make sure you renew it on time so that your coverage doesn’t become inactive for a period of time.
Once you pay off your car loan, you won’t need to worry about receiving any more CPI charges.
Eric Schad is an insurance writer with over a decade of experience writing in the insurance, music, and finance industries. Eric’s mission is to craft compelling writing that answers car owners’ most-often-asked questions in a straightforward, easy-to-understand way. Eric has written close to 8,000 short-form articles for Jerry. Prior to joining Jerry, Eric had years of experience in freelance copy and web content writing.
Andrea Richard is a writer and editor with nearly 15 years of experience crafting content for a variety of industries. In writing for Jerry, Andrea’s mission is to deliver relatable and informative content so readers can better understand the costs associated with car ownership and car leasing. A native Floridian and a road trip enthusiast, Andrea first learned to drive on a Honda Accord when CDs were still a thing. She has served on the Society of Professional Journalists Florida board of directors and volunteers as a judge for national journalism contests. Her work has earned several awards for feature writing, investigative reporting and branded content campaigns.
Everett Cook is an award-winning journalist and editor with more than 10 years of experience across a variety of industries. In editing for Jerry, Everett’s mission is to help readers have a better understanding of the costs of owning or leasing a car and to better understand their vehicle in terms of insurance and repairs. Prior to joining Jerry, Everett was an editor for Axios. His previous work has been featured in The New York Times, The Los Angeles Times, The San Francisco Chronicle, The Atlantic, Atlantic Re:think, The Boston Globe, USA Today, and others. He’s also been a freelance writer and editor with experience in SEO, audience building, and long-term content roadmaps. Everett is a proud graduate of the University of Michigan.
