Who Are Insureds?
A pivotal point in every mature parents' life
is the time that their children leave to start their own households.
Among the items that may be overlooked during this time is whether
your grown children have bought their own insurance.
Most personal insurance policies define insureds
to include the following:
- The person named (shown) on the policy
- The named person's spouse (who lives in
the same residence)
- The other relatives of the named insured
who live at the same residence
The problem with coverage begins when the living
arrangements change.
Related, But Not Residents
Blood is often perceived to be thicker than
insurance contracts, but policy wording prevails. An adult son
or daughter may think that, when a loss happens, coverage is available
from mom or dad's homeowners or auto policy, but it isn't. Policies
are typically clear. A relative is covered, but only if the relative
is a full-time resident of the named insured's household. Even
if the nonresident child lives next door, her parents' policy
is not going to spread its coverage to take care of her belongings.
If this fact appears harsh, know that insurance
contracts are meant to handle sources of loss that can be easily
identified. Person A's cars or home is protected by Person A's
auto or homeowner policy. Imagine if that weren't the case.
Example: The
Rabbitfield's home and cars have been insured by Plausible Fire
& Casualty for 20 years. In the last five years, the Rabbitfield's
children have grown and started their own households. Per the
Plausible home and auto policies, the insurance premiums and two
policies that covered the original family's two cars and one home,
now cover the original home and cars PLUS the following:
- Son Jimmy Rabbitfield's apartment and car
- Daughter Chana Rabbitfield's home and two
cars
- Other son Perry's home, seasonal home and
two cars
- Other daughter Bonnie's apartment and car.
Besides covering all of the property, the Rabbitfield
parents' policies ALSO cover everyone's personal legal liability.
While it might be a bargain for insurance consumers
if a single auto or homeowner policy could be stretched this far,
it's not likely that the insurance industry could survive the
flexibility.
Being Independently Insured
Understandably, insurance is not always a priority
for adult children who are now on their own. In the beginning,
there's often a phase where the kids commute between "home
base" and their new apartment or home and their property
is at both locations. The new grown-ups typically have few possessions,
especially possessions of high value, and this adds to the likelihood
that insurance is overlooked or seen as unnecessary. However,
even when possessions are few, EVERYONE has a legal responsibility
to handle the damage they accidentally cause to other people and/or
other people's property. When a child reaches adulthood, they've
also reached the point where they need to get their own insurance.
If an adult child asks you for insurance advice,
give them the name of an insurance professional you trust to help
them get the exact protection they need.
