If you’ve ever cosigned a car loan for someone, you may wonder what responsibilities come with it, especially regarding car insurance. So, is a cosigner responsible for car insurance? The simple answer is no, a cosigner is not directly responsible for maintaining or paying for car insurance, but they do have financial risk if the borrower fails to stay insured or defaults on the loan.
In the United States, car insurance is legally required in almost every state, and it protects both the vehicle and the lender’s financial interest. While the borrower must carry the insurance policy in their name, the cosigner’s credit and financial standing can still be affected if the borrower fails to maintain coverage or damages the vehicle.
Understanding the difference between loan responsibility and insurance responsibility is important before agreeing to cosign. In this article, we’ll explain what a cosigner’s obligations really are, what risks they face if the borrower doesn’t pay for insurance, and how to protect yourself if you’re helping someone finance a car.
What Does It Mean to Be a Cosigner on a Car Loan?
A cosigner is a person who agrees to take responsibility for a car loan if the primary borrower fails to make payments. Essentially, the cosigner guarantees the loan but does not hold ownership rights to the vehicle unless listed on the title.
Lenders often require a cosigner when the primary borrower has limited credit history or a low credit score. This gives the lender assurance that payments will be made, reducing their financial risk.
Key Points About Cosigning
- You are not the primary owner of the car unless you’re also on the title.
- You share equal financial responsibility for the loan.
- Your credit report will show the loan, and missed payments can hurt your score.
- You are not automatically responsible for car insurance payments.
Who Is Responsible for Car Insurance?
In every state, the person who owns and drives the car must maintain insurance coverage. If the car is registered under the borrower’s name, they are responsible for purchasing and maintaining the policy.
| Party | Insurance Responsibility | Reason |
| Primary Borrower | Yes | They own and operate the vehicle |
| Cosigner | No | Not the legal owner or driver |
| Lender/Bank | Indirectly | Requires proof of insurance for loan protection |
Even though the cosigner doesn’t have to buy or maintain insurance, the lender may require both the borrower and cosigner to ensure the car has comprehensive and collision coverage to protect the vehicle’s value.
Can a Cosigner Be Listed on the Car Insurance Policy?
Yes, a cosigner can be listed on the policy, but it’s not mandatory. In some cases, the lender may require it if the cosigner’s name appears on the car’s title.
Three Common Scenarios
- Cosigner Not on Title:
The borrower is the only owner and insurance policyholder.
→ Cosigner is not responsible for insurance. - Cosigner on Title:
Both borrower and cosigner are co-owners of the vehicle.
→ Cosigner should be listed on the insurance policy. - Cosigner Uses the Vehicle:
If both parties use the car regularly, both should appear on the policy to ensure full protection.
In general, if the cosigner is not driving the car, it’s better for them to stay off the insurance policy to avoid higher premiums or complications in claims.
What Happens If the Borrower Fails to Maintain Car Insurance?
If the borrower lets the car insurance lapse, the lender can step in to protect its financial interest. This often means adding force-placed insurance, which is costly and covers only the lender, not the driver.
Possible Consequences for the Cosigner
- The lender can repossess the vehicle if insurance lapses.
- Missed payments or loan defaults will appear on the cosigner’s credit report.
- The cosigner may still owe money if the car is damaged or totaled while uninsured.
Even though the cosigner doesn’t manage the insurance directly, they share responsibility for the loan, so any issues affecting the car’s value can affect them too.
Types of Car Insurance That Protect the Vehicle
Whether you’re a borrower or a cosigner, it’s essential to understand what insurance coverages protect a financed car.
| Coverage Type | Required by Law? | Required by Lenders? | Covers What? |
| Liability | Yes (in most states) | Yes | Injuries or damage you cause to others |
| Comprehensive | No | Yes (for financed cars) | Fire, theft, weather, vandalism |
| Collision | No | Yes (for financed cars) | Damage from a crash or collision |
| Gap Insurance | Optional | Recommended | Covers difference between loan and car’s value |
If the borrower drops any required coverage, both the borrower and cosigner face financial consequences, since the lender can demand full repayment of the loan.
Does the Cosigner Need to Be on the Car Title?
Not always. The cosigner’s main role is financial, not ownership-related. However, some lenders include both the borrower and cosigner on the title as co-owners to secure their interest.
If the cosigner is listed on the title:
- They may need to be included on the insurance policy.
- They share ownership rights and may need to sign during a sale or trade-in.
If the cosigner is not on the title:
- They have no ownership of the vehicle.
- They’re not legally required to carry insurance for it.
Example Scenario: How Insurance Responsibility Works
Let’s look at two simple examples to understand who’s responsible.
Example 1: Borrower-Only Ownership
- Borrower: John
- Cosigner: Sarah
- Insurance Policy: In John’s name
If John stops paying insurance and gets into an accident, Sarah is not responsible for damages. However, her credit can still be hurt if the car is repossessed and the loan defaults.
Example 2: Joint Ownership
- Borrower: Emma
- Cosigner: Tom (listed on title)
- Insurance Policy: Joint
If Emma crashes the car and insurance doesn’t cover the full cost, both Emma and Tom may be financially responsible since both names appear on the title.
Why Lenders Require Full Coverage on Financed Cars
When a car is financed, the lender technically owns the vehicle until the loan is paid off. That’s why they require full coverage to protect their asset.
Full coverage includes:
- Comprehensive insurance for non-collision events
- Collision insurance for crash-related damage
Without these, a total loss could leave the borrower and cosigner responsible for paying off a loan on a car that no longer exists.
Cosigner’s Risk if Borrower Defaults on Loan
Even though insurance and loan payments are separate, a lapse in insurance can trigger major problems for the cosigner.
Potential Financial Risks
- Credit score damage: Late payments or repossession affect both borrower and cosigner.
- Loan collection actions: The lender can pursue the cosigner for unpaid balances.
- Loss of vehicle collateral: If the car is uninsured and totaled, both owe the remaining balance.
- Difficulty obtaining new credit: Future lenders may see the cosigner as a higher-risk borrower.
To protect yourself, always ensure the borrower keeps both loan and insurance current.
Can the Cosigner Require Proof of Insurance?
Yes, and it’s highly recommended. As a cosigner, you have the right to verify that the borrower has maintained insurance coverage. Ask the borrower to:
- Provide a copy of the insurance declaration page.
- List the lender as a loss payee, ensuring they’re notified of any cancellation.
- Notify you if coverage changes or lapses.
If you’re unsure, you can contact the lender to confirm the insurance status at any time.
How to Protect Yourself as a Cosigner
Cosigning can help someone build credit, but it comes with risks. To protect yourself:
- Ensure the borrower purchases full coverage.
- Request to be notified of any policy cancellations.
- Keep a copy of all loan and insurance documents.
- Encourage automatic payments to prevent missed deadlines.
- Consider requiring the borrower to add gap insurance for total loss protection.
If you suspect the borrower is not maintaining insurance, contact the lender immediately to prevent further issues.
What Happens to the Cosigner if the Car Is Totaled?
If the car is totaled in an accident:
- The insurance company pays the lender directly for the car’s market value.
- If the payout is less than the loan balance, the borrower (and cosigner) are responsible for the difference unless gap insurance is in place.
Example
Car loan balance: $20,000
Insurance payout after total loss: $15,000
Remaining balance: $5,000
→ Both borrower and cosigner owe the remaining $5,000 to the lender.
This is why lenders often recommend gap insurance for financed cars to protect both the borrower and cosigner from large financial losses.
Cosigner vs Co-Borrower: The Key Difference
Many people confuse these two terms, but they have different roles in insurance and loan responsibility.
| Role | Loan Responsibility | Insurance Responsibility | Listed on Title? |
| Cosigner | Responsible only if borrower defaults | Not required to maintain insurance | Sometimes |
| Co-Borrower | Shares equal responsibility | Must be listed on policy | Yes |
If you are a co-borrower, you share both ownership and insurance duties. But as a cosigner, your role is mainly financial you guarantee the loan, not the insurance.
FAQs
No. The primary borrower is responsible for buying and maintaining car insurance. The cosigner’s responsibility is limited to the loan, not the insurance policy.
Only if their name is on the car’s title or if they regularly drive the vehicle. Otherwise, it’s not necessary.
The lender can repossess the vehicle or add expensive force-placed insurance. The cosigner’s credit may also be affected if the loan goes into default.
Not easily. The borrower must refinance the loan in their own name or pay it off in full to release the cosigner.
Yes. The loan appears on your credit report, and any missed or late payments can lower your credit score.
The borrower should maintain liability, comprehensive, and collision coverage at minimum, plus gap insurance for added protection.
Conclusion
While a cosigner is not directly responsible for car insurance, they share financial liability if the borrower fails to make payments or maintain proper coverage. The borrower must carry active insurance to protect both themselves and the lender’s interest, but any lapse can indirectly affect the cosigner’s credit and financial standing.
Before agreeing to cosign a car loan, make sure the borrower understands the insurance requirements, and always verify coverage remains active.
If you want to compare affordable comprehensive and full-coverage car insurance policies for financed vehicles, visit Alias Insurance a trusted platform that helps U.S. drivers find free quotes from top-rated providers to stay compliant and protected.
