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By Deal Pack - August 2, 2012
Did you know that nearly 14 percent of all drivers in the United States do not carry any form of automobile insurance? This is not good news for BHPH dealers and finance companies whose best interest is in protecting their assets. However, there is a way for you to battle this unfortunate reality and it comes in the form of Collateral Protection Insurance (CPI). CPI policies can insure vehicles that are held as collateral for loans held by BHPH dealers and finance companies. The CPI policy will kick in the moment the buyer fails to provide proof of insurance to its lien holder. This gives the lender true peace of mind because it transfers all the risk of loss to the insurance company.
Not only does CPI manage your risk of loss, it also protects the interests of your customers and investors. Some customer’s may even prefer to pay a higher premium to not have to deal with obtaining and keeping track of their own insurance. Do not confuse CPI with blanket insurance, which covers customers who have already obtained insurance. CPI only affects uninsured borrowers.
So how does this all work? Usually when a loan is originated the buyer will sign an agreement which states they will obtain vehicle insurance protecting themselves as well as the lender through the life of the loan in the event that the vehicle is damaged. The buyer will then provide the lender with proof of insurance which is then verified by their CPI provider. When proof of insurance is not received and all communications with the buyer have been exhausted, the lender may elect to have the CPI coverage “force-placed” on the buyer’s account to protect itself from the risk of damages or total vehicle loss. The CPI scheduled monthly premium is then added to the customer’s account increasing the principal balance and loan payments. When the buyer finally secures insurance, CPI will no longer be assessed to the account.
If you are considering implementing a CPI plan it would be wise to make sure that your current dealer management solution (DMS) provides a means to add the premium to your active accounts on a scheduled basis. This will save you time in the long run by keeping accurate records of true account balances for collection purposes.
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Advanced Business Computers of America (ABCoA) develops and supports end-to-end software solutions for the subprime finance industry. Since 1983,
we have helped automotive dealerships and finance companies eliminate duplication, remain compliant, and achieve success with dependable, all-in-one software and white glove service and support.
Deal Pack is a complete, all-in-one software ecosystem customizable to your exact needs and scalable to your exact size - helping improve your operations, grow your business,
and solve the challenges you face. Whether you are a finance or sales company, multi-entity or publicly traded company handling BHPH or LHPH, operating or capital leases,
internal or external floor-planning, retail, rentals, consumer loans, origination, or seasoned paper, Deal Pack is the dependable software for mission critical operations.
Deal Pack handles all of your business needs transparently – providing you measurable improvements and complete financial control, saving you time,
increasing your bottom line, and allowing you the freedom to focus on your daily operations. Deal Pack is relied upon by thousands of customers across
all 50 states in the United States and six countries around the world. Customers properly using Deal Pack have never lost an IRS audit.
To learn more about ABCoA, visit www.abcoa.com.