What is Collateral Protection Insurance?

http://www.mexperience.com/guide/essentials/transport/mexico-auto-insurance.php

If you have a loan for your vehicle in Wisconsin, you are usually required to prove you have insurance on that vehicle. Most financial institutions do not accept ‘liability only’ insurance for this, which is the bare minimum required by law. They generally require full coverage, which includes comprehensive and collision coverage.

So, what happens when your insurance comes due and you can’t afford your policy? If you go more than 30 days without insurance, Horizon Community Credit Union will send a letter asking you for your insurance information. After 60 days, another letter is sent. The 60-day letter says without proof of insurance your account will be assessed with a Collateral Protection Insurance (CPI) policy.

Some people think that this is a pretty good deal! This way the insurance goes right on their loan and they don’t have to worry about coming up with the premium money. Trust me, a CPI policy is not a good deal, and here's why:

1. It’s VERY expensive and only lasts for 1 year. Each year that the policy is assessed, more will be added to your loan. Your required payment will also increase.

2. This policy does NOT qualify as 'liability only' coverage. Remember, Wisconsin requires all vehicles to, at minimum, have 'liability only' coverage. If you get pulled over and the officer asks for proof of insurance, CPI doesn’t qualify.

3. This insurance only covers the loan amount with the credit union, not necessarily what your vehicle is actually worth. If you were to be in an accident, a CPI policy may not pay for any repairs. In the event of your car being a total loss, the CPI policy probably won’t pay much more than what the amount of your loan is.

So if your insurance is getting too expensive, be sure to shop around and find a rate you can afford. Having your own car insurance coverage will be cheaper than the CPI policy we would be required to put on your loan. Any questions? Please feel free to call the Horizon Community Credit Union at 920-433-0122.

Post by: Mary D.