The kids are getting ready to go off to college in the next couple of weeks. You’ve put together a checklist of all the things they’ll need to move into their dorm or off-campus apartment, opened a bank account with a debit card, and figured out how much those tuition payments will be each month. But have you given any thought to insurance while they’re away from home? If you’re like most people, the answer is “not really”. You probably think, “Well, they’re covered under our current homeowners and auto policies.” Unfortunately, this is not always the case.
Let’s start off with your homeowner’s insurance coverage. Under a typical policy, personal property is covered for loss or theft anywhere in the world. Ok, so far. But under the heading “Who is an insured?” the typical policy states that all “resident relatives” are insureds. In the case of a student away at school it could be argued that the student is no longer a resident and a claim could be denied on this basis. But if you’re lucky and the claim is paid, there is another ramification: claim surcharges. Once you submit a claim, your policy will usually be surcharged at renewal, and depending on the amount of your premiums, this surcharge could be significant. Finally, there is no “loss of use” coverage extended on a homeowner’s policy to a separate residence. So if your student’s off-campus apartment becomes uninhabitable in the event of a fire, you’d still be on the hook under the terms of the lease to pay the rent, but wouldn’t have insurance to cover the cost of a temporary rental or hotel room.
The remedy here would be a renter’s insurance policy. They are inexpensive (usually less than $200 per year), insulate your homeowners policy from claim surcharges arising out of your student’s losses, eliminate the gray area of who is a resident, and pay for temporary living expenses.
How about auto insurance? Courts have generally held that students away at school are still considered to be “family members” under a personal auto policy and, thus, are covered while operating autos at school. However, there is an important exclusion in the typical policy that states that if someone else’s vehicle is furnished or available for the regular use of a “family member”, there is no coverage. Truly the terms “furnished or available” or “regular use” constitute somewhat of a “gray area”, however let’s assume that the student does have regular, unrestricted access to the roommate’s car. In that case, the student is at the mercy of the insurance that the roommate carries on the vehicle, if any, since the parents’ policy would not provide any coverage.
The remedy for this “gap” in coverage is usually the addition of an endorsement to the policy commonly referred to as Extended Non-Owned Coverage for Named Individual. However, this endorsement also contains wording that could still render a lack of coverage, specifically that it excludes coverage for non-owned vehicles owned by “members of the same household”. So is a college roommate considered a member of the same household? What about housemates in a fraternity or sorority? Unfortunately, this could also be subject to interpretation by the insurance company, and subsequently the courts.
Clearly, there are no easy answers. So, the best thing to do is to discuss the situation with your insurance representative in advance. As you can see from this example, insurance contracts are sometimes subject to interpretation and can be difficult for a consumer to understand. This is one reason why it is advisable to purchase your insurance from a qualified professional insurance agent.
Be aware that YOUR insurance company’s auto policy may differ from the industry standard form, so be sure to check with your agent to see if the issues discussed in this article apply to your situation.
Nicholas G Chapekis Jr. CIC, CRM
