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What effect does co-signing on an auto loan impacts insurance Financing a Car With Co-Signers in this series Financing a Car With Co-Signers







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3 minutes read. Published 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 finance. She's also a full-time worker at her local library, where she assists the community gain access to information on financial literacy, in addition to other subjects.







The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain the confidence to manage their finances with 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 a loan to buy a car and you are required to sign the loan. While you'll be accountable for the loan but agreeing to co-sign an will likely not affect your auto insurance policy or the rates you pay. There may be some modifications to your insurance to keep in mind before signing a co-signer. Co-signing an auto loan is unlikely to affect the insurance coverage of someone who is buying a car by is not an obligation to take lightly. However, it's likely that co-signing for a loan could affect the auto insurance policy you have or the premiums you pay for coverage. If you aren't planning to drive the vehicle you are co-signing for it shouldn't be any changes to your . "Co-signing a vehicle loan will not affect your insurance premiums in the event that, for instance you decide to add the co-signed car to your insurance policy, in which case the premium would increase to reflect the additional automobile," says Douglas Heller director of insurance at the Consumer Federation of America and an internationally-recognized expert on insurance. There could some consequences for the co-signer if you co-signing with fails to make payments but your insurance coverage should be unaffected. Certain exceptions to the rule are a few specific exceptions to this rule. If you reside alongside the primary borrower on the loan and are currently on the same insurance the policy of yours is affected. As Heller states the policy's premium will be increased to reflect the additional vehicle. But even driving the car regularly could mean you need to include it in your insurance plan, which could increase the cost. Co-signers are generally not held accountable for accidents If the vehicle is in the middle of a collision or accident in general, you're not liable as a co-signer. "Co-signing for an auto loan isn't a reason to be liable for the borrower's poor driving, DUI or even driving without auto insurance" states Steve Sexton, a financial advisor and the CEO of Sexton Advisory Group. However, the limits of your responsibility are altered when your name appears on the title of the car as a co-owner, which would be the case if you were a full co-applicant on the loan as opposed to merely a co-signer. In this situation, you may be liable for damages in an accident if the driver of the vehicle you share ownership with is found to be the one responsible or the one who caused the collision. If the incident results in a lawsuit, you could also be held accountable. Even if your co-owner doesn't get blamed in the accident the premiums could rise. A co-signer is different from. having a share in the ownership co-signer has only responsibility on behalf of the loan. The lender will notify you in the event that there are late payments or the primary borrower defaults. Since a co-signer essentially acts as a guarantor for the primary borrower, you are required to be able to pay for the loan in the event that the primary borrower is unable to pay. But that has no impact on your insurance. You are only a co-owner in a vehicle if your name is listed on the title. Co-owners have an equal stake in the vehicle , and are accountable for keeping loan payment current, when a loan is used to purchase the car. That means a co-owner will have to also list the car on their insurance, whether it is frequently driven or not. This will result in an increase to your policy cost. As a co-signer, you don't have legal rights of ownership and stakes in the car, and your name will not be listed on the vehicle's title. However, not all lender has a co-signing policy. Some may only allow the joint application. This will put you equally at stake for the loan and the vehicle itself. This means that the insurance company you use to be informed -- as you'll be listed in the title of the carand your insurance could be affected. The bottom line Co-signing a car loan for the benefit of a loved one or friend could be an enormous benefit for the principal buyer. While there are risks for your credit as co-signer, your auto insurance policy should remain the same. However, before you take this step contact your insurance provider 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 over five years ' experience within personal financial matters. She is also a full-time librarian at the local library where she helps the community gain access to information on financial literacy, among other subjects.



Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers feel confident to control their finances with clear, well-researched information that breaks down complicated subjects into digestible pieces.






Auto loans editor




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