I Cosigned a Car Loan: Am I Responsible After an Accident?

As soon as your kids are ready to buy a car, they might ask you to cosign. You might want to, but you should first know what you are responsible for before you do.

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You might want to help a friend or family member who can't get a car loan on his or her own by cosigning on the loan. You probably realize if that person defaults on the loan, you need to pick up the slack and make the payments yourself. Either that or tank your credit score and, if that happens, you'll be the one who'll need a cosigner in the future. But what about if the person you cosign for has an accident? Are you responsible for that, too?

Everyone's particular circumstances differ. The answer depends on many factors such as these:

• Whether you're on the title
• Whether you have an auto insurance policy
• Whether the car is listed on your insurance
• Whether you have an umbrella insurance policy

An umbrella insurance policy covers more than a standard

policy does. It could cover you if you are sued for damages resulting from an accident the person you consigned for was in. If you cosign on a car loan, you might want to consider adding this policy.

Cosigner or Co-borrower?

Generally, a distinction is made between a cosigner and a co-borrower. A co-borrower is listed on the car's title, and a cosigner is not. The co-borrower is considered the owner of the car just as much as the person who drives the car. You are more likely to be held responsible after an accident if your name is on the car's title. But you should still check with your insurance company or an attorney to determine what would apply in your case.

Negligent Entrustment

You might also be sued because of a term in the law called "negligent entrustment." This would apply if the person suing you could prove that you knew the person you cosigned for was unfit to drive the car safely. Reasons could include age, inexperience and a history of reckless driving.