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Adult Children on Your Policies Can Create Coverage Gaps

These days, many families are assisting their adult children financially far longer than parents of earlier generations. And that kind of support for college, and sometimes basic survival, can create insurance coverage gaps for the adult child that can be a major risk to their parents’ financial wellbeing.

If you have an adult child who is still financially dependent on you in some way, it’s critical that you secure appropriate insurance coverage. Issues that will affect coverage include if they are a full- or part-time student, where they live and how old they are.

Homeowner’s insurance

Under a homeowner’s policy, the insured is limited to:

  • Residents of your household who are your relative, and
  • A student enrolled in school full time, as defined by the school, and under the age of 24-29 (this varies depending on the policy and carrier, so check your policy).

This causes issues for some people, as many children are still in college beyond the policy cut-off date. You could run into coverage gaps for their contents and personal liability if:

  • They are older than the cut-off age on your policy,
  • They aren’t a full-time student, or
  • They are living away from home.

The picture gets murkier these days as well because many parents are renting an apartment or buying condos for their adult children to live in. Some parents may mistakenly think that since they are footing the bill, their insurance may still cover their adult child. But that’s not the case.

Auto coverage

Typical auto insurance policies will include family members under the coverage. The standard policy form defines a family member as “a person related to you by blood, marriage or adoption who is a resident of your household.”

For your adult child’s vehicle, insurance coverage is determined by:

  • Who owns the title on the car.
  • Who is listed on the policy as a named insured or additional insured.
  • Where the child is living.

As you can see, even if a parent owns the title of the car and it’s insured under the parent’s policy, if the adult child is driving the vehicle and lives on their own, they could run into coverage issues in certain instances.

According to West Bend Mutual Insurance Company, the following scenarios could leave you with coverage gaps:

  • If a vehicle is co-titled or titled solely to the child, but the child isn’t listed as an additional insured or named insured on the parents’ policy.
  • Your child borrows a friend’s car (which the friend had not insured) for the day, gets in an accident and injures the driver of the other car.
  • Your child rents a vehicle, doesn’t buy the insurance offered by the rental car company and then is in an accident.
  • Your child is hit by an uninsured motorist while walking across the street. There is no medical payments or uninsured motorist’s coverage for their own injuries.
  • Your child is at a concert and accidentally bumps someone off the edge of the stadium bleachers, causing severe injuries. There’s no coverage for the injuries caused to that person.

If you have an adult child on your policy, play it safe and give us a call so we can go over your policy and circumstances with you to identify any possible coverage gaps.

Without the proper insurance protection for injuries and damages, you risk significant financial liabilities that you may not be able to cover.

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