Auto Insurance Claims: auto insurance, full coverage insurance, finance contract

Question
I cosigned on a vehicle for my son.  I am filing to have my name removed from the vehicle tomorrow.  My son can no longer afford the car payment and the auto insurance.  Of course it's full coverage since a loan is still owed. Can we cancel the auto insurance? or do we have to provide proof that we have purchased a new auto policy before the current auto insurance cancels it?  He's going to file bankruptcy and have the car repossessed so that's why we want to cancel the auto insurance

Answer
Hi Beatrice,

You should be aware that when you co-sign for a loan, it is the same as if you bought it your self. The finance company will not allow you to remove your name from the loan. If your son files for bankruptcy, YOU will still be responsible for the full amount of the loan. The finance company will then come after you for repayment of the loan and will file suit against you if you do not make the payments.

As far as the insurance, the finance contract requires that you keep full coverage insurance on the vehicle at all times. When you cancell a pollicy the insurance company is required to notify the finance company. They will then require you to provide proof of replacement coverage or they will buy a policy for you and add it to your finance contract. The policy that the finance company would purchase if many times more expensive than you could buy on your own and it only protects their interest in the vehicle.

I hope this helps
Richard Hixenbaugh