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What effect does co-signing on a car loan impacts insurance financing a car with Co-Signers In this Series Financing a Car with a Co-Signer
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3 minutes read. Published September 21, 2022
Writer: Kellye Guinan Written by Personal and business finance contributor
Kellye Guinan is a freelance editor and writer who has more than 5 years experience working in the field of personal finances. She also works full-time as a employee at her local library where she helps her community access information about financial literacy, among other topics.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate from late 2021. They are committed to helping readers gain confidence to manage their finances by providing clear, well-researched information that break down complicated topics into bite-sized pieces.
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If you or a loved one is in need of assistance to secure an loan to purchase a vehicle, you may be asked to sign the loan. While you’ll be accountable for the loan but agreeing to co-sign it will not impact your own auto insurance policy or the premiums you pay. However, there could be some adjustments to your insurance policy to keep in mind before accepting a co-signer. Co-signing a car loan is unlikely to affect your insurance Helping someone purchase a car by is not an obligation to take lightly. However, it is likely that co-signing the loan will affect the auto insurance policy you have or the premiums you pay for coverage. If you do not plan to drive the vehicle that you are co-signing for then there shouldn’t be any changes to your . «Co-signing the vehicle loan is not likely to affect your insurance premiums, unless, of course you decide to add the vehicle you co-signed to your own insurance then your premium will increase in order to cover the additional automobile,» says Douglas Heller director of insurance for the Consumer Federation of America and an internationally recognized expert in insurance. While there could have consequences in the event that the individual who you are co-signing on behalf fails to make payments, your insurance should generally not be affected. Some exceptions to the rule are some exceptions to this rule. If you are living alongside the primary borrower on the loan and are already on the same insurance, your policy will be affected. As Heller states the policy’s premium will be increased in order to reflect the addition of the vehicle. However, even if you drive the vehicle frequently could require you to include it in your insurance policy, which will raise your cost. Co-signers usually aren’t held responsible for injuries if their vehicle is in the middle of a collision or accident in general, you’re not held accountable as a cosigner. «Co-signing for a car loan isn’t a reason to be liable for the borrower’s poor driving, or DUI, or driving without auto insurance» says Steve Sexton, a financial advisor and the CEO of Sexton Advisory Group. But the limitations of your responsibility are altered in the event that your name is listed on the vehicle’s title as co-owner . This is the situation if you were a full co-applicant on the loan and not just a co-signer. In this scenario you could be held accountable for damages in an accident if you are the owner of the car that you co-own is found to be the one at fault or who caused the collision. If the accident results in a lawsuit, you may also be held accountable. Even if your co-owner isn’t found at fault in the accident, your premiums may still rise. A co-signer is different from. becoming a co-owner A co-signer is only responsible on behalf of the loan. The lender will notify you in the event that you are in arrears or if the primary borrower fails to pay. Because a co-signer acts as a guarantor to the primary borrower, you have to pay the loan even if the primary borrower is not able to. But that has no impact on your insurance. It is only co-owner of a car in the event that your name is mentioned on the title of the car. Owners of co-owned vehicles share an equal stake in the car and are equally responsible for keeping the loan payments on time if they take out a loan was used for the purchase of the vehicle. This means that a co-owner will have to also list the car on their insurance policy, regardless of regardless of whether the vehicle is used frequently or not. This will result in an increase in your insurance premium. If you are a co-signer, then you don’t have legal rights of ownership and stakes in the car and your name will not appear on the car’s title. But not all lender offers a co-signing option. Certain lenders may only permit co-signing on a joint application, which could put you both at risk for the loan and the vehicle itself. This means that the insurance company you use to be notified — because you’ll be in the title of the carand your insurance could be affected. The bottom line is that co-signing an auto loan for a friend or loved one could be an enormous benefit for the principal buyer. While there are risks for the credit of co-signer, your auto insurance policy should remain the same. But before taking this step make sure you contact your insurance company to determine if your policy is affected.
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Written by a Personal and Business finance Contributor
Kellye Guinan is a freelance editor and writer with more than five years ‘ experience within personal finance. She also works full-time as a worker at her local library where she helps her community access information about financial literacy, as well as other subjects.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers to take control of their finances by providing clear, well-researched facts that break down otherwise complicated subjects into digestible pieces.
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