A question parents and their college-aged children don’t ask, but we need to ask, is, “Will these college students be covered under their parents’ Homeowners’ and Personal Auto policies while they’re living away from home and attending school?” The answer may be, “Yes.” However, the answer may be, “No.” And, sometimes the answer could be, “Maybe….”
Here we review how the parents’ Homeowners’ and Personal Auto policies cover their children when they’re away at college. A word of caution: This discussion is based on the wording of the Insurance Service Office’s (ISO) Homeowners’ and Personal Auto forms. Many insurers have their own company-specific forms, and their policy provisions may not be identical to those found in the ISO forms. As always, consult your insurers’ forms to determine if their terms and conditions are the same, broader or more restrictive than the terms and conditions discussed below.
The Millers’ 21-year-old son, Buster, and their 18-year-old daughter, Princess, have loaded their cars and are headed to college. Buster is entering his junior year, and Princess will be a freshman. Buster is sharing an apartment with three of his fraternity brothers, and Princess will live in the dormitory.
Will their “stuff” – clothes, computers, TVs, music systems, books, etc. – be covered under their parents’ Homeowners’ policy? Will they have liability coverage if they cause injury or damage to another person? The Homeowners’ definition of “insured” includes “a student enrolled in school full-time, as defined by the school, who was a resident of your household before moving out to attend school, provided the student is under the age of 24 and your relative.”
Therefore, as long as Buster and Princess satisfy three requirements – full-time student, resided at home before attending school, and under the age of 24 – they’re considered an insured under their parents’ Homeowners’ policy.
What if it takes Buster five or six years to complete his undergraduate degree or Princess decides to attend graduate school? If they reach the age of 25 before completing school, they’re no longer insureds. However, there is an ISO endorsement, Additional Insured – Student Living Away From the Residence Premises (HO 05 27), that can be used to extend coverage under the parents’ Homeowners’ policy to the student who is age 25 or older.
Since Buster and Princess are insureds, their “stuff” will be covered for the same perils as the personal property located in their parents’ home. However, it could be limited. The Homeowners’ policy’s limit of liability for “personal property usually located at an ‘insureds’ residence, other than the ‘residence premises,’ is 10 percent of the limit of liability for Coverage C, or $1,000, whichever is greater.”
Therefore, if the Millers’ home is insured for $200,000 and they have a personal property limit of $100,000, the “stuff” belonging to Buster and Princess is limited to $10,000. Again, there is an ISO endorsement to address this problem. The Personal Property at Other Residences endorsement (HO 04 50) allows you to purchase an additional amount above the 10 percent of Coverage C limitation.
One area where the Homeowners’ policy provides broader coverage for a student’s personal property than for their parents’ personal property is if the loss is due to theft. Under the peril of theft, the Homeowners’ policy excludes loss caused by theft “that occurs off the ‘residence premises’ of property while at any other residence owned by, rented to, or occupied by an ‘insured,’ except while an ‘insured’ is temporarily living there.” However, this exclusion then states, “Property of an ‘insured’ who is a student is covered while at the residence the student occupies to attend school as long as the student has been there at any time during the 60 days immediately before the loss.” This exception to the exclusion provides coverage for the personal property of college students when they’re home between semesters.
One last comment on Homeowners’ coverage for college students. If they’re living in an apartment rather than a dormitory or a fraternity or sorority house, and qualify, purchase a Tenant Homeowners policy (HO-4).
Buster and Princess probably have their own cars. After all, it would be un-American to send a child off to college today without their own automobile. Are there any concerns here? Could be.
Who owns the cars? If titled in the kids’ names, then they need their own Personal Auto policies. What limits will they buy? Probably minimum. Since they’re “family members,” will they have any coverage under their parents’ Personal Auto policy? No. The Personal Auto policy excludes liability for “the ownership, maintenance or use of any vehicle, other than ‘your covered auto,’ which is owned by any ‘family member.’”
If the Millers have a Personal Umbrella, will Buster and Princess be insureds under that policy? Probably. However, in the event of a serious liability claim against Buster or Princess, there could be a major gap of no coverage since Buster and Princess did not purchase and maintain the underlying auto liability limits required by the Personal Umbrella insurer. This is a problem that frequently exists when the kids own the cars, buy the insurance and expect to have coverage under their parents’ Personal Umbrella policy.
What if the cars driven by Buster and Princess are owned by the parents? No problem as long as they keep those cars listed on the Millers’ Personal Auto policy.
But, what if Mr. and Mrs. Miller are tired of paying those high premiums for the car driven by Buster and they tell him, “When you get settled in school, find a local agent and buy an auto policy in your name.” The Millers then remove that car from their Personal Auto policy.
What liability limits will Buster buy? Minimum. That’s guaranteed! Remember, the parents still own the car. A good agent will probably discover whose name is on the title and list the Millers as named insureds on this minimum limits policy. A sorry agent may issue this policy in Buster’s name.
If Buster is involved in an accident, if the Millers are the named insureds, they will have those minimum limits. If the Millers are not named on the policy purchased by Buster, they could still be covered as “family members.” However, be careful here. Buster is probably insured with a nonstandard insurer whose terms are not as broad as the ISO Personal Auto policy.
What about coverage under their Personal Auto policy that has a liability limit of $300,000? No coverage there. The Personal Auto policy excludes liability for “the ownership, maintenance or use of any vehicle, other than ‘your covered auto,’ which is owned by you.” Again, a gap before the Personal Umbrella responds.
Too often parents of college kids think if they transfer the auto insurance to the kids, they’re getting rid of the exposure. Not true. In order to transfer the auto risk, you have to transfer the title.
Let’s wrap this up….
- Make sure your children who are away at college are still considered “insureds” in the Homeowners’ policies you write.
- Increase the 10 percent of Coverage C limitation on the student’s personal property, if necessary.
- Write a Tenant Homeowners’ policy for the student, if possible.
- If the parents still own the car being driven by the student, that car should be insured under the parents’ Personal Auto policy.
- If the parents want to take the student off of their Personal Auto policy to save money and have the student purchase the insurance, they should transfer the car to the student.
Will those college students be covered under their parents’ policies? That’s up to you!
Jerry Milton, CIC, contributed this resource. The legal profession recognizes him as an expert on insurance coverages. He is also an education consultant for IA&B, working with CISR, CIC and continuing education programs.