It's no secret, the average age that adult children continue to rely on their parents for financial support has varied greatly over the years. Higher education has become astronomically expensive, apartments and living costs are rising, and the burden of becoming financially independent is forcing many adult children to remain dependent on their parents well into their late 20s and early 30s. These complex life situations can reveal coverage gaps with many personal insurance policies, including auto, homeowner and umbrella.
Exposure to family personal autopolicy can depend on many factors; where the adult child lives, who a car has the title and is registered to and which is stated in the policy as a driver, named insured and further named insured.
In most traditional personal car policies, the definition of who has coverage includes "family members". Family members are usually limited to a "person who is related to you through blood, marriage or adoption who resides in your household". When a specific vehicle is named and insured by the parents alone, but in the possession of a child who is no longer living in the parents' household, this can create a gap in the coverage. If a vehicle is coordinated between parent and child, or only designated for the child, there may be a gap in coverage if the child is not properly listed as a named insured or further insured in the parent policy. A gap in coverage can also exist if the child is not correctly listed in a personal car policy and is injured as a pedestrian or a passenger in another vehicle with insufficient insurance limits.
Exposure to the Family Homeowner Policy may include the adult child's personal content and personal responsibilities. The coverage may depend on where the adult child lives, their age and their status as a part-time or full-time student. The content may include clothing, furniture, electronics, sports equipment and other personal belongings.
Most traditional homeowner policies define the definition of an "insured" as "living in your household who is your relative", but usually extend the coverage to addresses away from the primary home for "a student enrolled full-time in school, as defined by the individual school, and is under the age of … "Different companies have different age limits, but usually you can expect the limit to be somewhere between 24 and 29. This can show coverage gaps in personal content and personal responsibility as many adult children go on college and remained dependent on their parents well into their 30s. Part-time students who live away from home may be exposed to the same coverage deficiencies. In addition, most homeowner policies have less defined boundaries for "personal content away from the primary home" which creates a need for a separate tenant policy to adequately cover the adult child's personal content.
It is also becoming increasingly common for parents to provide housing for their adult children, including renting an apartment or buying a home or apartment. The parents can finance the purchase, but the adult child is usually the primary resident and the coverage may not extend from the parents' primary homeowners. In many cases, the adult child is the only name listed on the lease or obligation that requires them to carry the primary insurance coverage.
When there are coverage deficiencies in either car or homeowners, these gaps can also translate into family umbrella policies for large losses that create a huge financial impact on both parents and the adult child. Even if the adult child currently has limited income or assets, courts have the ability to garner future salaries, which creates a long-term impact on the adult child's financial future.
It is extremely important to understand coverage limitations and exceptions and discuss your unique family situations with a qualified personal insurance consultant at R&R. We can explain coverage restrictions, identify gaps and present solutions to ensure that all family members are properly protected. In many cases, it is imperative for an adult child to have their own personal auto policy, rental policy or homeowner policy, and we can help you find the most affordable coverage to meet their needs.
Below are real examples of situations where coverage deficiencies may occur:
- Your adult child is not correctly listed in a personal car policy and they borrow a friend's vehicle to drive to the store. On the way, they met a pedestrian who was crossing the road. Your child was aware that the friend had no insurance on the vehicle and has no liability insurance for the damage to the pedestrian.
- Your adult child is not properly listed in a personal car policy and rents a truck to move some furniture. They choose not to buy the insurance that the rental company offers. Again, there is no coverage for property damage to the rented truck or bodily injury to others in the event of an accident.
- Your adult child is not correctly listed in a personal car policy and is hit by an uninsured motorist as he crosses the street. There are no medical payments or uninsured motorists' coverage for their own injuries.
- Your adult child is not properly covered according to your homeowner and has a fire in their rented apartment. There is no coverage for damage to their personal contents or liability for damage caused to other units in the building.
- Your adult child is not properly covered according to your homeowners policy and badly injures another golfer on the golf course. Since they have no liability for liability, there is no liability for damage to the other party.