Logic & Language and Forms & Facts, Insuring College Students

“Whether four years of strenuous attention to football and fraternities is the best preparation for professional work has never been seriously investigated.” – Robert Maynard Hutchins

While this quote from a former University of Chicago president may be of some consternation to parents about to send their kids off to college, I would assert that a far greater concern should be the answer to the question, “Are they insured?”

But how many of your personal lines customers are thinking along those lines? Probably a tiny percentage. When my son was a high school senior, I offered to do a free workshop for parents on college exposures and how to “risk manage” them. No one took me up on the offer. That’s why you need to educate your customers and engage them in the exposure analysis process.

I blogged about this almost five years ago, and wrote and edited several more detailed articles that are still in the online research library of the Independent Agents & Brokers of America.

Due to space limitations, let me highlight some of the considerations for properly insuring college-bound students in general, then specifically under auto, homeowners and umbrella forms.

Under most personal lines forms, aside from named insureds, the broadest “insured” status is extended to resident family members. In general, the courts have found that kids away at college are still residents of the household and most policy forms today specifically address this, though with some limitations.

For example, in the current edition of ISO’s homeowners forms, coverage is extended to full-time students “as defined by the school” who are under the age of 24. What constitutes “full time” varies by institution, though probably most commonly it is 12 hours. But this can result in coverage gaps, for example, if a student drops a course or two and falls below the “full time” threshold. Or the child may stay over for summer school and only take six to nine hours. ISO attempts to remedy this with endorsement HO 05 27 – Additional Insured – Student Away At School.

If these qualifications are not met, and that can happen without the parents’ knowledge, unfortunately there may be no coverage. There may be other limitations that apply, as well (e.g., for some theft losses), and those limitations may vary for non-ISO carriers.

Auto Insurance

If your child is taking one of your vehicles to school, make sure the insurer is aware of the new garaging location.

Also, caution your child about other parties operating the vehicle. Some forms cover permissive users on the basis of the users’ reasonable belief they have permission to do so, but other forms may require more specific grants, sometimes from the named insured on the policy.

If your child will not have an auto at school, that doesn’t mean they won’t ever drive a non-owned auto. When I was in college without an auto, I often used my roommate’s car. Most personal auto policies exclude the use of any auto furnished or available for the regular use of a family member. There may be a way to endorse this coverage, but often that is not the case.

Homeowners and Umbrella Insurance

In addition to my earlier comments, keep in mind that, under ISO homeowners forms, only 10% of Coverage C extends to personal property of an insured “usually located at” another residence. Under ISO’s program, this can be increased with endorsement HO 04 50 – Personal Property at Other Residences – Increased Limit. Options like this may vary considerably from one insurer to another, for better or worse.

Because of the elevated liability exposure for kids at college, the liability portion of homeowners policies is potentially the most important. All ISO homeowners forms extend liability coverage to premises where an insured temporarily resides, so liability coverage is likely but should be confirmed by the insurer.

The main issue is limits. When my son went off to college, realizing that kids experiencing their first real taste of independence often do foolish things, I increased our liability coverage by doubling my umbrella liability limits.

The last issue I’ll discuss in this short overview is, what if a kid at college lives in an apartment off campus vs. a dorm, fraternity or sorority house on campus? Should the student get his or her own HO-4 renters policy or will the parents’ homeowners policy still cover them?

Over the years, I’ve had many agents tell me that an underwriter told them a student residing on campus was covered under a homeowners policy but not if they moved into an apartment. There is nothing in ISO’s homeowners forms to support this interpretation. There may or may not be in non-ISO forms. Regardless, if the insurer says there is no coverage without an HO-4, you know what their response will be if there’s a claim on the homeowners policy.

But, if there is a choice between the parents’ homeowners policy and an HO-4 for the student, which is preferable? Such a question was submitted to the Big I’s “Ask an Expert” service several years ago and, the responses from their Virtual University’s volunteer faculty was 10-2 in favor of the HO-4. I was one of the two dissenters.

The reason I voted in favor of the homeowners form is that my wife and I have an excellent homeowners policy, better than most HO-4s in the marketplace. We also have a true, quite broad umbrella policy which, as I mentioned earlier, we doubled the limits on. We were also able to continue insuring our son at college under our family auto policy. To provide him the same level and extent of coverage under his own insurance package would have been extremely expensive. By keeping him on our family package, it was far cheaper and the coverage was almost certainly superior to what would be available to him alone.

So, what do you think? How have you handled these issues in the past? What other coverage questions come to mind? Feel free to start a dialogue in the comments section in the online version of this article, or send me an email.