It’s said that parenting is primarily an exercise in letting go. One of the ways parents can let go while knowing that their children are still protected against common property and liability losses is to better understand when they are no longer covered under their policies and when it’s time for them to get their own.
Altus Partners gets asked many questions by our clients, but one we don’t get asked enough is, “When are our children no longer insured under our personal insurance policies?” To be fair, insurance isn’t always top of mind when there’s a big event like a child leaving home, whether after high school, going off to college, or graduating from college or graduate school. But it’s still something that parents and children alike should be mindful of.
What changes, what stays the same
Generally, a child is covered under all your personal insurance policies as long as they reside in your household. Practically speaking, that means they are covered under your policy while they are still living in your house, and consider your address the one where they receive legal documents like voter registration, driver’s license renewals, tax returns, etc.
Different insurers treat the issue differently, so it’s important that you review the definition of “Who is Insured” under your personal insurance policies or check with your agent or broker to find out from them.
When a child goes to college, they may be required to buy a separate renter’s policy under certain circumstances. But as a rule, the policy covering your primary residence should extend to a limited amount of contents coverage and full liability coverage for your child’s dorm room and apartment. Keep in mind that your coverage is never intended to cover your child’s roommate(s) and their possessions.
Halfway out the door
Where it gets more ambiguous is what happens when a child graduates from college but lives at home until they find a job. In that case, they are still covered under your personal insurance policies while a resident of your household. But once they move out to their own apartment, condo, or house, they are no longer covered under your policy and should get their own (more on that later).
Similarly, when a child goes to graduate school, if they still use your house as their legal address, most insurers will still cover them as residents of your household. But if they have an apartment and are out on their own, they will need their own insurance coverage.
The same basic principles apply to automobile insurance. When a child gets their license, they must be added to your auto policy, regardless of how much or how little the child drives and which car the child primarily drives. Auto insurance for a particular car must be in the name of the person who registers and titles the car. So if a child graduates from college and takes a car owned by their parents, or their parents buy them a car, that car needs to be insured by the parents—with the child listed as the primary driver—if the car is registered in a parent’s name.
What you may not realize
Both young adults and their parents are often not inclined to consider separate insurance coverage because they may think they don’t have any significant assets they need to protect.
But that’s not the only reason to have their own coverage.
Regardless of how much or how little they have, young adults are always exposed to potential lawsuits that could put whatever assets they have at risk and to possible garnishment of future wages, income, and investments. And when young adults rely solely on their parents’ insurance program, they may unwittingly expose their parents to unforeseen risks that could impact their parents’ financial well-being.
When a child leaves home for good, it’s time to bite the bullet and get their own personal insurance policies from an established and financially strong insurer with a record of paying claims fairly and quickly.
At a minimum, such coverage should include:
- Contents coverage for their clothes, furniture, and any other things they may own.
- At least $300,000 of liability to protect them against potential lawsuits alleging they caused property damage and/or bodily injury to a third party.
- Automobile insurance if they own or lease their own vehicle, including both physical damage coverage and at least $500,000 of liability coverage.
- At least $1,000,000 of umbrella liability coverage in addition to their personal liability coverage and auto insurance (if they have it) to protect them if they cause a catastrophic loss involving property damage and/or bodily injury to a third party.
Altus is here to help
Just as clients are part of the Altus family, so are their children. If yours are about to go out on their own—or recently have—we would be pleased to offer objective guidance, advice, and answers to whatever questions you may have about their insurance needs.