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Co-signing for a car loan impacts insurance financing a car with Co-Signers in this series Financing a car with Co-Signer







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3 minutes read. published on September 21, 2022.
Written by Kellye Guinan. Written by Personal and business finance contributor

Kellye Guinan is a freelance editor and writer with over five years ' experience within personal finances. She also works full-time as a librarian at the local library where she helps her community access information about financial literacy, as well as other subjects.







Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain the confidence to manage their finances by providing precise, well-researched and well-read information that breaks down otherwise complex topics into manageable bites.









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If a family member or friend requires assistance in securing the loan to buy a car, you may be asked to co-sign the loan. Although you'll be responsible for the loan, agreeing to co-sign and not be a factor in your own auto insurance policy or the premiums you pay. However, there could be some changes to your insurance to keep in mind before accepting co-signers. Co-signing an auto loan likely won't affect your insurance . Helping someone buy the car they want isn't an obligation to take lightly. However, it is unlikely that co-signing the loan could affect your auto insurance policy or the rates you pay for insurance. If you do not plan to drive the vehicle that you're co-signing on, there should be no changes to your . "Co-signing a vehicle loan will not affect your own insurance premium except, of course you decide to add the co-signed car to your own insurance then your premium will increase to reflect the added vehicle," says Douglas Heller director of insurance at the Consumer Federation of America and an internationally recognized expert in insurance. While there could some consequences for the co-signer if you are co-signing for fails to make payments but your insurance coverage should not be affected. Exceptions to the rule There are a few specific rules that do not apply to you. If you reside with the primary borrower of the loan and are currently on the same insurance and policy, then your policy will be affected. As Heller states the policy's premium will go up to reflect the new vehicle. However, even if you drive the vehicle regularly could mean you need to add it to your insurance plan, which could increase your premium. Co-signers usually aren't held responsible for accidents If the vehicle is involved in a collision or an accident, you are generally not liable as a co-signer. "Co-signing for an auto loan does not make you responsible for the primary borrower's reckless driving, or DUI, or driving without auto insurance," states Steve Sexton, a financial advisor and the CEO of Sexton Advisory Group. But the limitations of your responsibility are altered if your name is on the title of the car as co-owner -- which is the scenario when you are a full co-applicant of the loan and not just co-signer. In this scenario, you may be liable for the damages caused by an accident if your vehicle's driver you co-own is found to be the party responsible or the one who was the cause of the accident. If the incident results in an action, you could also be held accountable. Even if your co-owner doesn't get blamed in the accident however, your insurance premiums may increase. A co-signer is different from. having a share in the ownership A co-signer is only responsible on behalf of the loan. The lender will notify you in the event that there are late payments or if the primary borrower is in default. Since a co-signer essentially acts as a guarantor to the primary borrower, you are required to make payments on the loan even if the primary borrower is not able to. However, this has no effect on the insurance you have. It is only co-owner of the car when your name appears on the vehicle's title. Owners of co-owned vehicles share an equal stake in the vehicle , and are accountable for keeping loan payment current, when 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 coverage, regardless of whether it is frequently driven or not. This will result in an increase to your policy cost. Co-signers do not hold any legal rights to ownership or stake in the vehicle and your name won't be listed on the vehicle's title. However, not every lender allows co-signing. Certain lenders may only permit the joint application. This could put you both at risk for the loan and the vehicle itself. This means that the insurance company you use to be notified as you'll be listed in the title of the carand your insurance will be affected. The bottom line is that co-signing a car loan for someone you love can be a significant help for the principal buyer. Although there are some risks to the credit of co-signer, your vehicle insurance will remain the same. Before you make this move make sure you contact your insurance company to find out if your policy will be affected.


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Written by Business and personal finance Contributor

Kellye Guinan is a freelance editor and writer with more than 5 years experience working in the field of personal finances. She's also a full-time librarian at the local library where she assists 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 passionate about helping readers to control their finances through providing precise, well-researched and researched facts that break down otherwise complicated topics into bite-sized pieces.






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