Co-signing for Brother - what is my Liability?

[johncoctostan25]

My older brother fell on hard times and is digging himself out. I am considering co-signing on a small auto loan with him. He needs a small payment and to rebuild his credit score. I am not concerned with the price. Even if he can't make the $120 payment, I easily can and could carry that in perpetuity until he can afford it or I can sell the car.

My concern is insurance liability. Specifically, If I co-sign on an auto loan for him and he gets in an accident, can I be held liable?

I read an article on Nest that says I would have no liability, as long as he keeps the car properly insured.

Any input on my insurance liability exposure would be greatly appreciated.

 

[Heather]

What state are you in?

I have ran into this where in order to close the loan the car must be titled, insured and registered in both parties names. Is the brother going to pay for the insurance, is he going to buy enough insurance and stay claims free? In my state your name on those license plates makes you liable. Even if he starts having towing or glass claims they can still effect the rates for you if you are on his insurance. I don't know the requirements where you are but my local banks and car dealers make the co-signor go on the registration and insurance. I would find out if I were you.

 

[johncoctostan25]

We are in Utah. I would make him prove that he has enough insurance at all times.

I'm still nervous about it.

 

[HoosierLife]

We are in Utah. I would make him prove that he has enough insurance at all times. I'm still nervous about it.

Go with your gut. Co-signing is never a good idea.

 

[Josh]

We are in Utah. I would make him prove that he has enough insurance at all times.

I'm still nervous about it.

Get added to the policy. You could also put it on auto-pay with your info and have him pay you for the insurance so that way you know it's getting paid.

You would be financially liable for the loan and if there was an accident and repairs needed to be made without insurance, that wouldn't change your liability on the loan. If your brother hits someone with a car you own, you wouldn't be held liable for it. If you let your brother use a shovel and then he hits someone in the back of the head with it, you're not guilty of assault; it's not any different legally with the car.

 

[djs]

As people have alluded to, there are a few types of liability that you need to think about.

The first one is cosigning the loan. You are liable for the loan. Missed payments, repossession, whatever might occur during the normal course of the loan. It will likely show up on your credit report as a co-signer and can affect your ability to borrow if you need to.

The next one is family liability. From the way you describe it, your brother normally is pretty solid, but hit a rough patch. We all do that. We turn to our family for help through these times. Its great if you can be there for that time, but your brother and the rest of your family needs to understand if you can't. This is where people feel guilty about not co-signing, but you need to protect yourself first. If in doubt, have him build a savings account of a few payments so that if something happens, the money is there.

Insurance liability - This is usually pretty negligible, as long as insurance is in force. Claims are rated to the driver and/or the primary policy holder. You can be a named insured without being primary and it will usually not have an impact on you. If there is a major accident, it may show up on your insurance as well, but it would be non-rated since you were not the driver. It could impact your claims free discount, but that is somewhat negligible.

Insurance liability - the real issue. Lets say the car gets totaled, stolen, whatever. It happens. Now, lets say the value of the car is $15K and the loan is $20K. The bank will want their $5K. This is where people get themselves in trouble, since they don't want to pay off the balance on the car they no longer have, they want to go get a new car.

Insurance liability: A minor issue. In the event of an at fault accident, even with insurance, the deductible has to be paid. Just make sure there is a contingency plan for this. This is a good way for payments to fall behind.

Now, the one I think you were asking about: If your brother causes an accident and injures someone, can you be legally held liable for this? There is no clear answer. To further Josh's statement, if you loan someone a lawn mower and you know the blade may come off and it does while the person you lent the lawn mower to is using it, you have a certain amount of liability for that.

In this case, since it is really your brothers car, he is using it daily, responsible for maintaining it, etc., it is a stretch for you to be held liable. The vehicle insurance would cover this up to the policy limits. Keep in mind though, this does not prevent someone from naming you in a lawsuit in an attempt to throw a wider net. You could end up hiring an attorney to write a few letters on your behalf. Also, keep in mind, that only a lawyer can give you an official non-answer to this question. They are the experts at beating around the bush.

Dan

 

[blue_wynd]

Will the dealership allow cosigning without you going on the title? That will solve the insurance liability question.

 

[INSUREGEEK]

djs made some great points!

I would add that if your brother's "rough patch" has anything to do with alcohol/drugs or criminal activity, you could absolutely be sued for Negligent Entrustment in the event of a serious accident involving repeats of those behaviors. Say he had a prior OVI, then he goes out and kills someone while OVI again in a car you helped him get - yeah.

If those things are not in play, then absolutely follow the great advice already stated.

 

[biggies]

Will the dealership allow cosigning without you going on the title? That will solve the insurance liability question.

Perfect answer. Absolutely correctly.

ALSO..... Make sure you are in fact, the co-borrower and not the BORROWER. Sometimes dealerships will "flip the names" in order to get more favorable rates, thereby allowing them
to make more $

Yearssssssss of experience ^^^^^

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djs made some great points!

I would add that if your brother's "rough patch" has anything to do with alcohol/drugs or criminal activity, you could absolutely be sued for Negligent Entrustment in the event of a serious accident involving repeats of those behaviors. Say he had a prior OVI, then he goes out and kills someone while OVI again in a car you helped him get - yeah.

If those things are not in play, then absolutely follow the great advice already stated.

???????

Follow the advice of others...... not this ^^^^^^

Way way off

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If your brother causes an accident and injures someone, you be legally held liable for this or not? it depends on the situation and the statement from your brother ...There is a article on INSURE-HEAVEN site that explains a same scenario like this ...do check you might get your answer

Ughhhhh. I'm not sure where this stuff is coming from, BUT legally, whoever the vehicle is registered to is the legal owner of the vehicle and therefore must be insured under that individual's name. Period. Just because you're on a loan, doesn't mean you are legally responsible for his actions.

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As people have alluded to, there are a few types of liability that you need to think about.

The first one is cosigning the loan. You are liable for the loan. Missed payments, repossession, whatever might occur during the normal course of the loan. It will likely show up on your credit report as a co-signer and can affect your ability to borrow if you need to.

The next one is family liability. From the way you describe it, your brother normally is pretty solid, but hit a rough patch. We all do that. We turn to our family for help through these times. Its great if you can be there for that time, but your brother and the rest of your family needs to understand if you can't. This is where people feel guilty about not co-signing, but you need to protect yourself first. If in doubt, have him build a savings account of a few payments so that if something happens, the money is there.

Insurance liability - This is usually pretty negligible, as long as insurance is in force. Claims are rated to the driver and/or the primary policy holder. You can be a named insured without being primary and it will usually not have an impact on you. If there is a major accident, it may show up on your insurance as well, but it would be non-rated since you were not the driver. It could impact your claims free discount, but that is somewhat negligible.

Insurance liability - the real issue. Lets say the car gets totaled, stolen, whatever. It happens. Now, lets say the value of the car is $15K and the loan is $20K. The bank will want their $5K. This is where people get themselves in trouble, since they don't want to pay off the balance on the car they no longer have, they want to go get a new car.

Insurance liability: A minor issue. In the event of an at fault accident, even with insurance, the deductible has to be paid. Just make sure there is a contingency plan for this. This is a good way for payments to fall behind.

Now, the one I think you were asking about: If your brother causes an accident and injures someone, can you be legally held liable for this? There is no clear answer. To further Josh's statement, if you loan someone a lawn mower and you know the blade may come off and it does while the person you lent the lawn mower to is using it, you have a certain amount of liability for that.

In this case, since it is really your brothers car, he is using it daily, responsible for maintaining it, etc., it is a stretch for you to be held liable. The vehicle insurance would cover this up to the policy limits. Keep in mind though, this does not prevent someone from naming you in a lawsuit in an attempt to throw a wider net. You could end up hiring an attorney to write a few letters on your behalf. Also, keep in mind, that only a lawyer can give you an official non-answer to this question. They are the experts at beating around the bush.

Dan

Oh my GOD. His payment is 120 bucks a month.
He'll never be upside down or have a GAP.

2000 words could have been saved if you read the OPs first post.

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djs made some great points!

I would add that if your brother's "rough patch" has anything to do with alcohol/drugs or criminal activity, you could absolutely be sued for Negligent Entrustment in the event of a serious accident involving repeats of those behaviors. Say he had a prior OVI, then he goes out and kills someone while OVI again in a car you helped him get - yeah.

If those things are not in play, then absolutely follow the great advice already stated.

Negligent entrustment???

Read the original post. The guy is NOT going to be on the registration or title .

He is merely cosigning for his brother on a $120
car payment.

Making mountains out of mole hills

Let's pretend for a moment. Real case scenario
Husband and wife buy a house. Hubby first, wifey second on the mortgage. She's at work. He's home. He goes nuts and kills his next door neighbor when he came over to ask to borrow his power drill.

Is the wife in any way legally responsible? Criminally or in a civil case?

There's your answer.

 

[INSUREGEEK]

Biggies.....you quoted me twice! I feel honored.

Yes, negligent entrustment is a thing. It can be a very big thing. Consider a car on my shop lot right now:

Girlfriend has 2 DUI's and a suspended DL. The boyfriend she lives with bought a car in his name and insured it in his name, but she's the full time driver of the car. Her DUI #3 hasn't worked out so well for him. His car is wrecked AND it's impounded. The nice Sherriff even showed up the other day with some pretty blue lawsuit papers filed by the family of the kid she hit. Not only is he in it because he owns the car, but because he knew the situation and let her drive his car anyway.