When and Why to Remove Your Child from Your Policy

By |2022-06-03T10:40:09-06:00June 3rd, 2022|

GraduateMost of us know that a young driver on their own policy is more expensive than keeping them on the family policy. However, having to pay expenses from an accident out of pocket because coverage didn’t apply could be even worse.

With May being the month of graduations, you may have a child that is heading out on their own. Let’s talk about how that affects your auto and home insurance.

AUTO INSURANCE

First, let’s talk about when to remove your son or daughter from your auto policy. As long as they are living in your household and driving a vehicle you own, they should remain on your policy. If they are headed to college, will be a full-time student, and are still considered your dependent (you claim them on taxes, they use your address as their permanent residence, etc.), they also can remain on your policy. When they are living on their own, have their own job and are no longer going to school, it is time for them to get their own auto insurance policy.

So why is it important that they have their own insurance? We often hear from parents that they still own the vehicle and wonder why they can’t just keep the vehicle and their son or daughter insured on their policy. Insurance policies are intended to cover one household per policy. If your policy has vehicles from multiple addresses (other than the qualified exemptions like a full-time college student) or a vehicle listed at the home address but damaged at a different residence, there is the possibility the insurance company can deny a claim.

Also, keep in mind that as long as your name is on the title of the vehicle, you can be considered to have liability in an accident even if you weren’t driving. Your child likely hasn’t had the opportunity to acquire as many assets as you and lawsuits usually follow the deep pockets. It may be time to consider signing that vehicle over to your son or daughter. If you are concerned that they can’t afford the insurance premium, we can set up the new policy to bill your account.

Another good reason to make sure they have their own policy is so they have the broader coverage of being considered an “insured” on an auto policy. Most policies define “insured” as the named insured on a policy (usually the parents) and family members who are residents of the household. Although your son or daughter will always be a family member, if they are no longer a resident, the insurance company does not give them the status of “insured.”

When you are an “insured” under the auto policy, coverages extend to you outside of the vehicles listed on the policy. You can have coverage while driving someone else’s vehicle, including a rental car. You also have medical payments and uninsured motorist bodily injury (UMBI) coverage as a pedestrian or as a passenger in someone else’s vehicle. Unfortunately, the Denver news seems to frequently have stories of a pedestrian being injured or worse in a hit and run situation. As an “insured” on an auto policy, your UMBI coverage up to your policy limits can be used in this situation. Your coverage can also extend to you as a passenger in your friends vehicle if their coverage is not sufficient to cover your expenses. It may seem unlikely, but when in that situation, it is good to know you have additional coverages to help with the growing medical bills.

HOME INSURANCE

Coverage from your home insurance can extend for your child if they are moving away to college. This is usually limited to 10% of your personal property coverage limit so be sure to review this amount to make sure it is adequate. This best applies for children living in the dorms.

Once they are ready to move off campus and rent an apartment, it is usually best for them to purchase their own renter’s insurance. This will provide liability coverage in their name along with coverage for their personal property which likely now includes additional items like furniture that wasn’t needed in the dorm room. Liability for your son or daughter is the best benefit to you, the parent. We’re sure we can all think back to our college days and remember kids do stupid things. If you co-sign the lease, be sure that you are listed as an additional insured on their renter’s policy.

We would be happy to provide quotes for separating these policies or discuss the situation in more detail with you. Please feel free to call and speak with one of our agents to answer any questions.

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