Collateral Protection Insurance

Why is Collateral Protection Insurance (CPI) added to a loan?

The borrower agrees to provide physical damage coverage insurance for the term of the loan contract and when he or she fails to do so, the financial institution may purchase CPI to protect the interest in the collateral. CPI is only meant to be used as short-term insurance until the borrower provides physical damage coverage insurance. If CPI is added, it is an additional amount to the existing monthly loan payment, and the additional amount is subject to change.

What is the purpose of CPI?

CPI protects against loss to collateral from physical damage.

Why is CPI premium expensive relative to the regular insurance premium?

CPI premium is based on the balance of the loan contract. It is not underwritten based on age, driving record, high-risk vehicles, et. Therefore, all CPI certificates are considered high-risk, usually resulting in premiums more expensive than insurance obtained by the borrower.

Are binders accepted as adequate temporary coverage?

Binders are accepted as adequate coverage if they contain six required policy components. Most binders are accepted as coverage for 30 days, however; some companies extend coverage for 60 days. We will only accept a binder during the coverage period. Once the binder coverage has expired, it will no longer be accepted as proof of coverage.

Is an application for insurance accepted as adequate coverage?

An insurance application is accepted as coverage for 30 days if there is wording on the application indicating that it offers binders coverage and if all six components are present. If there is no binder clause and the application has the agent’s signature and indicates a down payment was made, it will be considered an acceptable document.

Insurance Policy Requirements

1. Named Insured – The name of the insured will often match the borrower’s name on the loan. Named insured may not match if there is a co-signer, marriage, or DBA account. Policies will be accepted with a different name if all other insurance policy requirements are met.
2. Policy Period – There are two types of policy periods – one with a fixed date of expiration and one without a fixed date of expiration, termed continuously. We require renewal policy notifications for fixed date expiration policies. If the policy is continuous, we do not require further insurance notification unless the policy is canceled.
3. Policy Number – The policy number is needed for verifying coverage information with the insurance company.
4. Coverages – Policies must have comprehensive and collision coverages with deductible limits not to exceed $1,000. Comprehensive and collision can be combined into one coverage; physical damage or all perils, instead of being separated. Comprehensive can also be termed as Other Than Collision (OTC), Comp or Specified Perils, or Causes of Loss.
5. Lien Holder – The lien holder clause identifies your financial institution, to which all claim proceeds will be jointly issued along with the insured, usually the borrower. All policies must have your financial institution listed as a lien holder because this ensures that you will receive claim settlements for collateral losses and notification when pertinent information is changed or the policy is canceled. The lien holder clause may also be termed Loss Payee, Additional Loss Payee, Third-Party Interest, or Other Interest.
6. Collateral Description and VIN – The insured collateral description must match the loan’s assigned collateral. The collateral description is considered to be the year, make, and a minimum of the last six digits of the vehicle identification number.

Update Insurance Coverage on a CFCU Loan

Once your auto loan is complete, speak with your insurance agent to add Carolina Federal Credit Union as the lienholder with the address: P.O. Box 924636 Forth Worth, TX 76124. Policies must have comprehensive and collision coverages with deductible limits not to exceed $1,000. The insurance holder or you can fax, email, mail, or upload the declaration page to the QR code below. Insurance cards are not an acceptable document, as it does not include deductible amounts. If you have any questions about Collateral Protection Insurance, please contact us.

MyLoanInsurance.com/carolinafcu is customized to the need of the borrowers. MyLoanInsurance.com/carolinafcu gives the borrower the ability to view transactions, periods of insurance coverage, lapses when notices were sent, and more. Additionally, borrowers can now upload insurance directly to the site. Scan the QR code below to go directly to MyLoanInsurance.com/carolinafcu.

Send insurance coverage:

Fax: 1-877-497-0454

Email: carolinafcu@myloaninsurance.com

Mail To Address:

Carolina Federal Credit Union

P.O. Box 924636

Forth Worth, TX 76124