Q

Can someone else insure my financed car?

A

Insurance and lenders likely will not allow someone else to insure your financed car, unless they can prove insurable interest in the vehicle.

If your car is financed, meaning it was purchased with a car loan, the lender will likely require the person who financed the car to be the policyholder on the car’s insurance policy. The lienholder might also require you to include them on the insurance policy too.

Your lender is just one party with a say in how you insure your vehicle — most car insurance companies will only insure your vehicle if you are the car’s owner, leaseholder, or the named party on a car loan.

In order to insure a car, insurance companies look to see what your “insurable interest” is in the vehicle. If you want someone else to insure your financed car, you’d have to prove they have insurable interest, meaning that they'd be financially affected if anything happened to the vehicle. Typically, if someone’s name is not on the car loan, they do not have enough insurable interest in the vehicle to take out a policy on it.

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However, there are some circumstances when insurable interest can be proven even if the person taking out the policy isn’t the one whose name is on the loan, and some insurance companies may allow someone else to insure your financed car under specific circumstances, although it’s very rare.

Key Takeaways

  • In order for someone else to insure your financed car, you have to prove that they'd be financially affected if anything happened to your vehicle

  • Most car insurance companies will only insure your vehicle if you are the car’s owner, leaseholder, or the named party on a car loan

  • If you want someone else to get insurance for your car, you may have to co-title the vehicle or have them co-sign the car loan

When would someone else need to insure my financed car?

Insurance companies and lenders typically require the car’s owner or the person whose name is on the car loan to also be the car insurance policyholder. But there are actually a few instances where you might want someone else to insure your financed car even though they’re not the one who took out the loan.

  • The car is financed under a grandparents name, but they gift the car to their child or grandchild before it is paid off

  • The financed car is used as a family vehicle

However, even in the above circumstances, it can be difficult to find an insurer or lender who will allow someone else to insure your financed car if the loan is in your name.

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When can someone else insure my car?

Most insurance companies will simply not allow someone else to insure your financed car, and some lenders won’t allow it either. This can be true even if you own the car outright. In most cases, insurance companies require the potential policyholder to prove that they have insurable interest in the vehicle before they agree to insure the car.

Typically, insurance companies consider people like the co-signer of a car, vehicle owner, or leaseholder to be people with insurable interest. It’s very difficult to prove insurable interest if you don’t have a financial stake in the car.

Proving insurable interest

Auto finance companies typically require you to show evidence that the name on the car loan is the same name on the auto insurance policy. If the person you want to insure your financed car does not live in the same house as you, your insurer and finance company typically will not allow them to insure your vehicle, because they don’t have enough insurable interest in the vehicle.

One way to prove someone has insurable interest in your financed car is to have them added as a co-signer to the loan. If your lender allows you to add your relative as a co-signer on the loan, that may be enough insurable interest for an insurance company to list them as the primary policyholder on the car’s insurance policy. That said, you’d still need to be listed on the insurance policy. Most insurers require all licensed drivers in a household to be on a policy.

If you want someone else to insure your financed car because you simply want them to pay for your car insurance, and they agree to it, they should be able to make those payments, but you still need to be the primary policyholder.

If you bought a car for your child who is a minor and the car is in their name, you may still be able to be the main policyholder on their insurance policy. In fact, insurance companies might require a parent or guardian to be a co-signer on the policy if the driver is a teenager. Beyond these limited examples, though, it’s extremely difficult for someone to take out an insurance policy on a vehicle they don’t own or lease.

Frequently Asked Questions

Can a car be insured in one name and registered in another?

Your car must be insured and registered under the same name. If there are multiple names on the vehicle registration, then those names should also be listed on the insurance policy. Essentially, any members of your household who will be driving your car should be listed on your policy.

Can you insure a car that you don't own?

No, you cannot insure a car that is not registered under your name. If you don’t have an insurable interest in a vehicle (meaning you’d be financially affected if anything happened to it) most car insurance companies will not allow you to insure it.

Can I own a car and be on my parents insurance?

If you live in your parents’ home and drive a car they own, you can stay on their car insurance policy as long as you’re at that address. If you own your own car and your name is the only one on the title, however, it must be insured under your name, even if you live in your parents’ home.

Can someone else drive my financed car?

Yes, someone else can drive a car that you’re still making payments on. You’re free to lend your car to whoever you want. In most cases, if you give someone else permission to drive your car and they cause an accident, your insurance will cover the costs, even if you weren’t in the car with them at the time.