Collateral Protection Insurance (CPI): Dual-Interest Policies & Auto Hazard Coverage Requirements
Understanding vehicle insurance mandates during title loans: comprehensive/collision requirements, force-placed CPI insurance, and protecting collateral equity.
Because a title loan uses a vehicle as sole collateral, lenders require physical damage insurance to safeguard the asset against collision, theft, vandalism, and total loss.
1. Standard Insurance Requirements
Loss Payee Endorsement
Borrowers must maintain full comprehensive and collision auto insurance with the title lender named as the primary 'Loss Payee' and 'Lienholder' on the insurance policy declaration page.
2. Force-Placed Collateral Protection Insurance (CPI) Risks
If a borrower allows their private auto insurance policy to lapse during the title loan term, the loan contract permits the lender to purchase force-placed Collateral Protection Insurance (CPI) and add the premium charges to the borrower's monthly balance:
- High Premium Cost: CPI insurance premiums are significantly more expensive than standard consumer insurance policies.
- Zero Liability Coverage: CPI only protects the lender's financial interest in the vehicle hardware—it provides ZERO liability coverage for bodily injury or property damage caused to other drivers.
Automotive Credit & Vehicle Equity Review Board
Our research panel evaluates vehicle title lending statutes, wholesale loan-to-value (LTV) appraisal benchmarks, TILA APR disclosures, and statutory repossession rights under UCC Article 9.
Estimate Your Vehicle's Equity Loan Value
Connect with state-authorized direct auto title lenders to review borrowing amounts based on your car's wholesale appraisal value.