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Insurance needs attention when your Child moves out or goes to College


It is with a mixture of happiness and concern that parents watch their children pack up to move into college housing or move into their first apartment. One more step towards the empty nest!  Hoping of course that they won't have to move back into the house afterwards.

When a child is driving a car provided by her parents but she is now living away from home, there are new precarious exposures presented to the parents.  This is a good time to consider changes to the insurance provided to that young adults car insurance. It might be an excellent time to also obtain a renter's insurance policy for his or her contents.

Many parents tend to overlook the insurance available to their college freshman's contents. Most Homeowners policies have a coverage extension to offer coverage for family contents that are temporarily stored at another location. But how long is the student staying at that new address?  Is that considered temporary?

When that student enters into a apartment lease, the agreement may call for evidence of insurance. In some cases, this can be amended to the parent's homeowners policy, as an accommodation to this requirement.  Meeting this need is better served by the child obtaining a renters policy that includes liability coverage called for in a lease.

A couple advantages are obtained because the renter's policy will likely have a much smaller deductible afforded to losses, and those losses won't be attributed to the parents' homeowners policy which would potentially lose a Claims Free Discount they were enjoying. Plus, putting the policy in the child's name provides the evidence of insurance for that adult as required in his or her lease agreement. Having their own insurance is a nice step toward taking on independence. 

Another by-product of having one's own contents policy is the ability to obtain a bundling discount from the carrier by placing the child's auto insurance with that same company. As a young adult over 18, it can be a good time to obtain a stand alone auto policy in the child's name. 

Removing a youthful operator and a lower value car from parent's policy would also help reduce the premium assessed on the parents' higher value cars. This is because there may be a surcharge rating affecting the more expensive vehicles due to having a higher risk driver. So removing the child would save cost for the parents. 

A major benefit is the removal of that person's accident record from the parent's policy. Sure, your ace student is also a safe driver, and maybe won't have any accidents. But what about them allowing another to borrow their car just that one time, or drive them home from a party and then that person causes an accident?  You know Murphy's Law says it could happen. That accident is applied to the policy covering that auto, which is primary in coverage. By letting them be on a stand alone policy, their record and driving experience is all theirs. If needed, the parent can still be billed for the premium if they are assisting the young adult with their expenses. 

The point is these life changes are a good time to revisit your insurance plans and review the options which make financial sense.

Post Edit:  It was asked of me: What if an adult child is still living at home, should they be on the parent's policy?  This is sometimes done because the car is in the parent's name along with a lien. It is possible to write the policy in the child's name and add the parents as an additional interest for their ownership of the vehicle.  The ideas above still apply.

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