Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insuran...

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager Chris Harrigan

UPDATED: Aug 11, 2021

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Here's what you need to know...

  • If you have a co-signer on a vehicle loan that you take out, this does not mean that you have to have the co-signer listed on your auto insurance policy
  • If you are the co-signer for a vehicle, make sure that all the necessary auto insurance requirements are taken care of, because you could be liable out of your own pocket in the event of a loss
  • If you have an auto policy, you may have a second authorized user on the policy, but this is not a co-signer in the traditional sense

You probably already know that having valid auto insurance is required for you to legally drive. If you have a car loan, your bank may also require you to carry comprehensive and collision insurance with small deductibles. They want to protect their investment. Some may also require GAP insurance to cover the gap between your loan and car value if you’re underwater when you experience a total loss.

If you need a co-signer to help you out with getting a car loan, it is not necessary for that person to be listed on your auto insurance policy for the vehicle, especially if the co-signer does not plan to drive the vehicle. A co-signer can help you qualify by adding income to your application. Insurance plans are based more on credit reports, driving record, etc. Even if one authorized user has a great credit score, they may penalize everybody if the other has a low credit score.

As a co-signer, you want to make sure that the borrower is fulfilling any insurance obligations that are part of the loan.

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When Should You Have A Cosigner on Your Car Loan?

If you need the assistance of a co-signer to be able to take out a loan to get a vehicle, this is a likely indication that your credit score is not great or that you do not have enough credit history for you to get a reasonable rate to borrow the money on your own.

In this circumstance, you may not be required to add the co-signer to your auto insurance policy, but you probably should be looking into ways to get your premium as low as possible.

Along with your driving record, your credit score can be a major factor in the rate that you pay for auto insurance. If you are a new driver and have not established sufficient credit to have a good credit score, then you may want to investigate being added to your one of your parents’ current auto insurance policy.

If they are willing to co-sign for a car loan for you, they are probably also willing to add you to their existing auto insurance policy.

Once you’ve gained more experience as a driver and established enough credit, you can look into securing your own auto insurance policy.

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What Is A Cosigner Responsible for on an Auto Loan?

If you are the co-signer on a loan for a vehicle, then you are legally responsible for the borrower’s financial obligations for the car. So if they’re not making payments on time, it could affect your credit score as well. You should never cosign with a family member you cannot trust to make on time payments or loans you cannot pay if needed.

While this does not necessarily mean that you are responsible for the auto insurance aspects of the car loan, there may be conditions of the auto loan that require that certain levels of coverage be maintained as a part of the loan.

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If the borrower is caught without maintaining the minimum auto insurance requirements, the lender may decide to tack on the price of the policy it chooses to the amount of the loan, which would also be rolled into the monthly premium payment.

Given that the co-signer is responsible for the financial obligations of the car loan, this could end up affecting you too.

If you happen to live in the same house as the loan borrower, then it makes sense for you to be listed as a driver on the auto insurance policy for the financed car.

This is because many auto insurance companies offer great discounts for having multiple cars from the same house insured by the same company. During the application process for auto insurance, the applicant is asked to list off the other drivers in their house anyway.

If a driver is not actually excluded from the auto insurance policy, then it is assumed that the driver will have access to the insured car and will be driving it.

This is then factored into the price of the auto insurance premium. If the co-signer has a better driving record than the actual borrower, this can be a big help in reducing the cost of auto insurance.

Before you make a decision as the co-signer about how you want to tackle auto insurance for a financed car, it is a good idea to speak with your current auto insurance agent.

You will be able to find out about your current coverage and how co-signing for the loan could affect whether you would want to make any changes in your coverage. Most times, a change is not necessary, but it is a good idea to evaluate your premium and coverage options anyway.

The Last Word on Adding a Co-Signer to an Auto Insurance Policy

While it is highly unlikely that it would be mandatory for a co-signer on a car loan to be added to the borrower’s auto insurance policy, a co-signer may still want to make sure that the borrower is fulfilling all insurance obligations under the loan agreement.

In addition, the borrower should think about ways to reduce the cost of auto insurance for the financed car, including exploring options to be added to the co-signer’s auto insurance policy.

This could be especially beneficial if the co-signer and the borrower live in the same house for a greater discount.

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