Getting a joint car loan is a serious commitment for both parties. When it comes to auto insurance, there are additional things to consider when deciding whether or not to get a joint car loan, especially if both parties do not live at the same address.
Basically, if you have a joint car loan with someone you live with (and you both have current driver’s licenses), your auto insurance company will almost certainly require that both you and your co-signer be listed as drivers on the policy. However, if you and your co-signer do not live at the same address, you have other options. The person that doesn’t drive the car could choose to be listed as “Additional Insured” on the policy, or could decide not to be listed on the policy at all. Let’s explore these two options.
If you are listed as “Additional Insured” on an auto insurance policy, the primary driver (the “Named Insured”) only needs to provide the name and address of the Additional Insured – nothing else is required, including driving and credit checks. This means that the auto insurance rate will be solely based on the Named Insured’s information and not on the Additional Insured’s. The auto insurance company will use the address to mail notifications on the policy, including payment due notices and claim information. This option may allow the co-owner of the vehicle to be protected from liability in case the driver of the vehicle is the cause of a serious accident. If you are a co-signer on a vehicle and do not reside with the primary owner we strongly recommend that you choose this option.
Your other option, however, is not be included on the auto insurance policy at all. As we have said, if you are not listed on the policy, you will not receive any notifications regarding the policy, so if something goes amiss with payments or anything else, the insurance company will not notify you – you will need to rely on your co-signer to inform you of any issues.
Doesn’t sound like that big of a deal right? Well, it could be. For instance, if your co-signer is perhaps your college-aged son or daughter, they might get into a situation that they do not want to tell you about (for example, forgetting to pay the policy or getting into an accident) and the insurance company would not notify you. Also, if someone decides to sue you, the insurance company has no obligation to defend you, even if they did decide to defend the policyholder. Both issues would be solved if you are listed on the policy, so again, if you are a co-signer, we strongly recommend that you be on the auto insurance policy for that car.