Last Updated on December 28, 2025

If you finance or lease a car, your lender usually requires you to carry certain types of car insurance to protect the vehicle until it’s paid off. If the lender can’t verify that coverage (or your policy lapses), they may add Collateral Protection Insurance (CPI)—also called lender-placed or force-placed auto insurance—to your loan.

Here’s the key point up front: CPI is designed to protect the lender’s financial interest in the vehicle—not to replace your personal auto insurance. It can be expensive, it can be backdated, and it may still leave you without the protection you need to drive legally.

Key Takeaways

• Collateral Protection Insurance (CPI) is lender-placed (force-placed) coverage added to your auto loan when your lender can’t verify you have the required insurance.
• CPI is designed to protect the lender’s collateral (the car), and it may not protect you the way a normal auto policy does—especially for liability and injuries.
• CPI is often more expensive than buying your own policy and may be applied retroactively if the lender believes you had a lapse in coverage.
• You can usually remove CPI by providing proof of qualifying coverage and confirming the lender cancels (and credits/refunds) charges for any verified insured periods.

What Is Collateral Protection Insurance (CPI)?

Collateral Protection Insurance (CPI) is insurance purchased by (or arranged by) your lender when they believe your vehicle isn’t properly insured. The “collateral” is the car itself. The lender adds the CPI cost to your loan balance or monthly payments because the loan agreement typically requires you to keep the collateral insured.

You’ll often see CPI described as “force-placed insurance.” The Consumer Financial Protection Bureau explains that force-placed insurance is what a lender may obtain when you let coverage lapse—and that it protects the lender, while the borrower pays for it. Learn more here: CFPB: What Is Force-Placed Insurance?.

When a Lender Adds CPI to Your Loan

CPI is usually triggered by an insurance verification problem. That could mean you truly don’t have the required coverage—or it could be a paperwork issue where coverage exists but the lender can’t confirm it.

Common reasons CPI gets added include:

• You never provided proof of insurance after purchasing the car.
• Your policy was canceled (often from nonpayment) or lapsed.
• You dropped required coverages or raised deductibles beyond what the lender allows.
• The lender isn’t listed correctly as the lienholder / loss payee on the policy.
• Mismatched details (VIN, address, policy number) prevent the lender’s tracking system from matching your coverage to the loan.

If you have a financed vehicle, keeping continuous coverage is part of the contract—not optional. If the lender believes the contract is being violated, CPI is one tool they use to protect the vehicle.

And while CPI is more common than repossession, insurance issues can become serious if they cause your account to become delinquent. Here’s what lenders may do if you don’t maintain coverage: can the bank take my car if I don’t have insurance?

What CPI Usually Covers (and What It Doesn’t)

CPI is most often focused on physical damage protection for the vehicle. In other words, it’s meant to cover damage to the car itself—not to protect you from lawsuits, injuries, or other common financial risks.

CPI is not the same as GAP insurance. GAP is designed to help if you owe more than the vehicle is worth after a total loss. CPI is typically about protecting the lender’s collateral (the car) with physical damage coverage. If you’re upside down on the loan, CPI may not prevent you from owing money after a total loss.

Why CPI Is Often More Expensive Than Regular Auto Insurance

CPI commonly costs more than buying your own policy for a few reasons:

• You don’t shop for it. The lender selects the program and pricing, not you.
• It’s priced to protect the lender. CPI is structured around the lender’s risk and administrative process, not around giving you the best value.
• It can be backdated. If the lender believes you had a lapse, CPI may be applied retroactively to the start of that lapse.
• It can change your payment. The premium may be added to your monthly payment or added to the loan balance, depending on the lender’s process.

Even worse, CPI can create a “coverage gap” problem: you might be paying extra while still lacking key protections (like liability coverage) that a normal auto policy would provide.

How to Remove CPI (and Potentially Get a Refund)

If CPI is already on your loan, you can usually remove it by proving you have the coverage your loan requires. The exact steps and timing vary by lender, but this is the typical process:

• Call your lender and ask exactly what coverage they require (coverages, deductibles, effective date, lienholder wording).
• Get proof of insurance from your insurer (ID cards, declarations page, or binder).
• Send proof using the lender’s preferred method and confirm they received it. In many cases, electronic proof of car insurance is acceptable, but lenders may still require specific documents.
• Ask for the CPI cancellation date in writing and verify whether any charges will be credited or refunded for periods where you can prove coverage existed.

Refund rules vary. In general, if you can show you had qualifying coverage for certain dates, lenders often remove CPI for those periods (and credit your account). If there was a verified lapse, you may still be responsible for CPI charges during that gap.

How to Avoid CPI in the First Place

Most CPI issues come down to lapses and paperwork mismatches. These steps help prevent both:

• Don’t let your policy lapse. If you’re switching insurers, avoid a cancellation gap—here’s how to cancel auto insurance the right way so you don’t accidentally create a lapse.
• Make sure the lienholder is listed correctly (lender name and address) on your policy.
• Confirm deductibles and coverages meet the loan contract before you finalize your policy changes.
• Set reminders for renewal dates and payment due dates so nonpayment cancellations don’t catch you off guard.
• Shop for better rates before you’re forced into CPI. If cost is the problem, start with insurers known for affordability: cheapest auto insurance companies.

FAQs on Collateral Protection Insurance

Final Word on Collateral Protection Insurance

Collateral Protection Insurance (CPI) is lender-placed coverage that may be added to your auto loan if you don’t maintain the insurance required by your contract. It’s meant to protect the lender’s collateral (your car), and it can be significantly more expensive than buying and maintaining your own policy.

If CPI is added to your loan, act quickly: confirm the lender’s requirements, provide proof of coverage, and get the CPI cancellation details in writing. If you believe CPI was applied incorrectly or not removed after you proved coverage, you can also submit a complaint here: CFPB: Submit a Complaint.