How Is Your Car Insurance Affected by Children in College?

Who owns the cars? If titled in the kids’ names, then they need their own Personal Auto policies. What limits will they buy? Probably minimum. Since they’re “family members,” will they have any coverage under their parents’ Personal Auto policy? No. The Personal Auto policy excludes liability for “the ownership, maintenance or use of any vehicle, other than ‘your covered auto,’ which is owned by any ‘family member.’”

If the Millers have a Personal Umbrella, will Buster and Princess be insureds under that policy? Probably. However, in the event of a serious liability claim against Buster or Princess, there could be a major gap of no coverage since Buster and Princess did not purchase and maintain the underlying auto liability limits required by the Personal Umbrella insurer. This is a problem that frequently exists when the kids own the cars, buy the insurance and expect to have coverage under their parents’ Personal Umbrella policy.

What if the cars driven by Buster and Princess are owned by the parents? No problem as long as they keep those cars listed on the Millers’ Personal Auto policy.

But, what if Mr. and Mrs. Miller are tired of paying those high premiums for the car driven by Buster and they tell him, “When you get settled in school, find a local agent and buy an auto policy in your name.” The Millers then remove that car from their Personal Auto policy.

What liability limits will Buster buy? Minimum. That’s guaranteed! Remember, the parents still own the car. A good agent will probably discover whose name is on the title and list the Millers as named insureds on this minimum limits policy. A sorry agent may issue this policy in Buster’s name.

If Buster is involved in an accident, if the Millers are the named insureds, they will have those minimum limits. If the Millers are not named on the policy purchased by Buster, they could still be covered as “family members.” However, be careful here. Buster is probably insured with a nonstandard insurer whose terms are not as broad as the ISO Personal Auto policy.

What about coverage under their Personal Auto policy that has a liability limit of $300,000? No coverage there. The Personal Auto policy excludes liability for “the ownership, maintenance or use of any vehicle, other than ‘your covered auto,’ which is owned by you.” Again, a gap before the Personal Umbrella responds.

Too often parents of college kids think if they transfer the auto insurance to the kids, they’re getting rid of the exposure. Not true. In order to transfer the auto risk, you have to transfer the title.

Cheat sheet Let’s wrap this up….

• Make sure your insureds’ children who are away at college are still considered “insureds” in the Homeowners’ policies you write.
• Increase the 10 percent of Coverage C limitation on the student’s personal property, if necessary.
• Write a Tenant Homeowners’ policy for the student, if possible.
• If the parents still own the car being driven by the student, that car should be insured under the parents’ Personal Auto policy.
• If the parents want to take the student off of their Personal Auto policy to save money and have the student purchase the insurance, they should transfer the car to the student.