Does a Cosigner Have to be on the Car Insurance Policy?

Buying a car is an exciting experience. However, not everyone who wants to purchase a vehicle has established credit or a stable income to qualify for an auto loan on their own. In these cases, a cosigner can help make car ownership possible by agreeing to assume responsibility for the loan if the primary borrower fails to repay it.

But what obligations, if any, does a cosigner have when it comes to insuring the car? Do they need to be listed on the insurance policy as well?

Below we’ll look at when a cosigner may or may not need their own coverage, how they can be added as a driver, and what impacts this can have on your rates.

What is a Cosigner?

A cosigner is someone who signs the loan agreement along with the primary borrower and agrees to become equally responsible for repaying the auto loan. Cosigners are commonly:

• Parents or family members with good credit
• Friends willing to vouch for the buyer’s ability to make payments
• Someone with an established income and credit history

By cosigning, this person is assuring the lender that the loan will be repaid on time each month. If the original borrower misses payments, the cosigner becomes responsible for making them instead.

However, cosigning the loan does not automatically make someone a co-owner of the vehicle. The cosigner’s name is not added to the title unless specified.

When Does a Cosigner Need Insurance?

In most cases, a cosigner does not have to be listed on the auto insurance policy. Here are some considerations regarding insurance and cosigners:

Only Drivers Need to be Insured

Auto insurance follows the vehicle, and policies generally only list the names of those who drive the car. The cosigner isn’t necessarily a driver unless you add them.

So if your cosigner doesn’t drive your car regularly, there is no inherent reason they would need to be insured. The policyholder and main driver (the purchaser) fulfills the insurance requirements on their own in this scenario.

Co-Ownership Requires Joint Coverage

The main exception is if the cosigner is also a registered co-owner of the vehicle. This would mean their name is included on the title along with the primary owner’s name.

In this situation, both names need to be covered together under the same policy. As legal co-owners, you share financial responsibility for the car. So you’ll both want to be insured in case of an at-fault accident.

Shared Use May Call for Extra Protection

Additionally, some lenders require the cosigner to be named on the policy if they will drive the car regularly. This ensures sufficient coverage is in place when the cosigner operates the vehicle.

Even if not mandated, it can give both parties peace of mind to add the cosigner voluntarily if they expect to use the car often. This prevents any insurance gaps while they are behind the wheel.

Adding a Cosigner as a Driver

If you determine it’s wise for your cosigner to have their own coverage, speak with your auto insurance agent or company about adding them as a driver.

Here’s what to expect:

• Provide Cosigner Details – Their full name, birthdate, driver’s license number, and other standard information for a policy holder.

• List as Secondary Driver – Your cosigner will be added as an additional driver, while you remain the primary policyholder.

• Share Vehicle Use – Note approximately what percentage of time each of you expects to drive the car. More wheel time usually means higher risk/premiums.

• Check Motor Vehicle Reports – Insurers will look at both driving records to assess overall risk. Additional driver fees or policy changes could apply.

• Reconsider Discounts – Adding a second driver may impact multipolicy, good driver, or other discounts on your current policy.

• Review New Quote – The insurer will provide an updated premium quote for review reflecting the cosigner’s addition before officially amending your policy.

If satisfied with the revised rate details, provide formal approval to add your cosigner as a driver. This confirms they’ll meet your state’s minimum liability requirements whenever operating the vehicle.

Impacts on Insurance Costs

Adding a cosigner to your policy brings another risk profile into the mix. Insurers will reevaluate the overall coverage terms accordingly.

Potential impacts include:

• Age Difference – Teen vs. experienced drivers represent very different risk levels. Premiums are adjusted up or down based on the combined age groups insured.

• Driving Records – Incidents like accidents, DUIs, tickets build higher risk. A cosigner’s clean history can offset this.

• Credit Histories – In most states, insurers evaluate credit-based scores as a risk predictor. The cosigner’s good credit can balance out someone with little established credit.

• Shared Use – The more often your cosigner drives could increase their risk factor and proportion of premiums.

• Discounts – Eligibility for certain discounts may change by adding a driver and shifting overall risk.

• Policy Limits – A cosigner with assets may merit higher liability and uninsured motorist coverage amounts.

In many cases, the combined risk and premium cost is lower by adding a more experienced, less risky cosigner to balance out a younger primary driver. But results vary case by case.

Cosigner Insurance FAQs

Here are some common questions about cosigners and auto insurance policies:

Do both cosigner and primary driver names need to be on the policy?

Only if the cosigner is also on the vehicle title as a registered co-owner. Otherwise the primary driver can insure the car on their own.

What information do I need from the cosigner for insurance?

Basic personal details like full legal name, birth date, driver’s license number, and contact information. Insurers will also review their motor vehicle record.

Can I get insurance without a cosigner knowing?

No, the cosigner must consent to being added as a driver. Insurance applications require a driver’s signature agreeing to any terms.

What happens if a cosigner drives the car but isn’t on the insurance?

The policy may not provide coverage if they are in an accident while driving the uninsured vehicle. Both parties could then be fully liable for damages.

Can I remove a cosigner from the insurance later?

Yes, as long as you notify the insurance company and specifically request their removal from the policy.

Key Takeaways

• A cosigner who doesn’t drive the car or appear on its title usually doesn’t need insurance.
• Co-owners must be named together on the same policy.
• Adding a cosigner can lower costs if they offset higher risk factors.
• All drivers should be listed to avoid gaps in coverage while operating the vehicle.

Having an experienced cosigner backing your first auto loan can make the car buying process much smoother. Be sure to consider their insurance needs and potential impacts before finalizing your policy. This ensures you both have comprehensive protection while sharing the vehicle.