What is Collateral Protection Insurance or Creditor Placed Insurance?
• Insurance coverage that: (1) is purchased unilaterally by a creditor subsequent to the date of a credit agreement, (2) provides monetary protection against loss of or damage to the collateral, and (3) is purchased according to the terms of a credit agreement as a result of a debtor’s failure to provide evidence of insurance or failure to maintain adequate insurance covering the collateral, with the costs of the collateral protection insurance, including interest and any other charges imposed by the creditor in connection with the placement of the collateral protection insurance, payable by the debtor. Collateral protection insurance includes insurance coverage that is purchased to protect only the interest of the creditor and insurance coverage that is purchased to protect both the interest of the creditor and some or all of the interest of the debtor. The term of a collateral protection insurance policy may, but need not, extend to the full term of the credit transaction.
