Cosigners are responsible for partial payments on a vehicle. There are many purposes for cosigning a car. Perhaps the original buyer does not have the credit or finances to purchase the vehicle. A cosigner with better credit or a more stable income is the original buyer’s solution.
Because the cosigner is partially responsible for the vehicle, it is in their best interest to insure that vehicle. Insurance coverage prevents a financial loss for the cosigner. In the event of an accident, the cosigner would receive some restitution back. However, the cosigner is not required to be on the insurance.
Cosigner Options For Coverage
A cosigner is not required to be on car insurance. This is especially true if they do not live with you. All people living in the same house must be on the insurance plan, even if they do not intend on driving the car. However, it may be in the cosigner’s best interest to be on the car insurance. They can monitor payments, cancellations, or changes in the policy if they share insurance with the original buyer.
A cosigner may opt into being additionally insured. Being additionally insured does not make you liable for the policy. It does give you the right to be notified of payments, cancellations, or changes in the policy. Additionally insured policyholder premiums should not be affected by accidents made by the named insured. Also, there are no credit checks; additionally insured only needs to provide their name and address.
Being additionally insured is a good option for cosigners who do not live with buyers. It protects you from liability if they have an accident. It also covers damage to the car that you are paying for. Being additionally insured also means that the car insurance company updates you on the policy through the mail. This way, you are protected from sudden changes in the policy or cancellations.
Be Cautious When Cosigning
There are a few complications for cosigning a car. Trusting the original owner to make the payments is an issue for most. This is because the cosigner is also responsible for payments, so if the payments are not made, then both of you are at risk of being sued.
Take precautions when cosigning. Add a clause that gives you possession of the vehicle in the event that the original buyer does not uphold payments. That clause should protect you from legal charges if you repossess the vehicle.
A cosigner should try to be on the car insurance in some way. Insurance protects the cosigner from being sued in the event of missed payments. It also lets the cosigner monitor changes or cancellations in the insurance policy.
There are a few options for cosigners, such as being additionally insured or purchasing your own coverage for the car. Either way, being a part of car insurance is recommended for your own financial safety. Failing to be on car insurance causes quite a few issues in the future.