“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
In a couple of months, hordes of young people will be enrolling or returning to colleges across the country. Have their parents considered the insurance implications of this change?
Recently someone sent me a video clip of a fire at a NY university dormitory/apartment building. Allegedly the fire resulted from cooking in one of the units (grease fire), resulting in a total loss to the building, the evacuation of 13 residents, and loss of personal property, but fortunately no injuries.
If your child negligently caused damage to rented premises and possibly damage to the contents of other residents (creating an additional living expense cost) and, heaven forbid, bodily injury or death, what is the best way to insure this exposure? Should parents extend their own homeowners (ISO HO-3 or 5), and hopefully umbrella, coverage to the student’s dorm room, apartment, rental dwelling, etc. or should a renter’s policy (ISO HO-4) be issued?
Damage to property can be many hundreds of thousands of dollars. The loss exposure is significantly greater for bodily injury and death…just Google “college student deaths” for examples of accidents arising from drinking, hazing, and other activities. Individuals who are renting premises, especially at colleges, often have a far greater exposure (frequency and severity) to lawsuits than resident homeowners.
I’ve heard some underwriters claim that, if the student is living on campus (e.g., in a dormitory), the parents can extend their HO policies, but if the student lives off campus they must have a renters policy. There is nothing in ISO HO forms that supports this position. So, if an underwriter insists on this, the carrier either uses their own forms or this is simply an underwriting preference.
When my son went to college, he lived in a dorm until he was able to move to an apartment as a senior. During this entire time, we insured his exposures under our own HO policy rather than buy an HO-4 renters policy. Why? Given that majority of renters policies are written with about $100K of liability coverage, how far would it go if a student burned down an apartment building or dormitory and/or killed or injured people? Our insurance at the time included $3.5M in coverage. What would it have cost to buy our son an HO-4 and a PUP totaling $3.5M? And the coverage under our policies was far better than anything we could have procured for him.
It just makes sense to extend the parents’ HO and umbrella coverage to college students and this might present an opportunity to sell a family an umbrella policy by explaining what can happen without adequate liability limits.
What do you think? Feel free to start a dialogue below in the Comments section.
Photo by Sean MacEntee 
Bill Wilson
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To try and build on thsi discussionI am going to take the contrary view. First the family probabaly ought to try and protect their limiits and coeverage Buying separate cover does this. It nalso helps firewall involvement in the loss or liability created by the son that might otherwise develop if insured by the same policy. Buying excess works although you may have a loss of coverage if not concurrent or they dod not provide teh same liability extensions. They also put a target on the afther’s back and they expose all his assets plus the umbrella for acttions of the son away from home. I would always recommend a separate policy and HO 4 and a separate auto policy for the kid as well if practicable form a cost standpoint.
“First the family probabaly ought to try and protect their limiits and coeverage Buying separate cover does this.”
I would think that most families would/should try to protect their children’s future. You do that with substantial assets or high liability insurance limits. They can likely get better coverage and higher limits using their existing insurance program or expanding it than they can buying a separate HO4 and PUP. I can give you an example of a kid in medical school who had his income garnished for 20 years. Try paying back college and medical school loans AND a large court judgment.
“It nalso helps firewall involvement in the loss or liability created by the son that might otherwise develop if insured by the same policy. Buying excess works although you may have a loss of coverage if not concurrent or they dod not provide teh same liability extensions. They also put a target on the afther’s back and they expose all his assets plus the umbrella for acttions of the son away from home.”
The parents are likely going to be involved in any significant lawsuit against a child. If they have assets and/or insurance, the plaintiff’s lawyer will discover that. Big data!
“I would always recommend a separate policy and HO 4 and a separate auto policy for the kid as well if practicable form a cost standpoint.”
Many, if not most carriers would agree with you. What does that tell you? 😉
If the family needs higher limits then first they should do asset protection and veiling. Then isolate and sgregate and quarantine the off premises exposure created by the offspring at a separate location. The need for limits does not change when someone goes to college the need to segragte the risk is corrected.
Agents work for the carriers That is their master by contract, code and common law They have three duties to the master. the first is fealty/ loyalty. the second is full disclosure and the third is accounting of all monies. Siince agents belong to the carrier your comment could easily be interpreted as failing to meet those requirements Your organization used to advertise the phrase independent agenst serve you first. they no longer do. Now it is trusted choice. For whom Answer their master the carrier not the insured. They dropped the old tag line because it was n ot true and was used against agents in court or so that is my understanding.
Parents may get involved as you stay but having a separate limit of coverage is a very good thing to have. Add to that asset protection and veiling and you have provided reasonable insulation. Depending on the fact pattern you may need a personal umbrella. Why would you want to make it easier to sue the kid as a way to climb that tower? Makes no sense to me. Unbrellas encourage frivilous lawsuits. Adding the college based child to it is like adding fructose to sugar. Are we going to practice control of risk or buy insurance for commission purposes? As an agent you are reuired to do the latter because that is what your master desires.
As the article states, when my son was in college, we covered him on our family personal lines package. Extremely broad coverage, high limits. The additional cost (related to auto garaging) was $24 as I recall. Providing him with $3.5M in liability coverage for an additional $24 was a bad idea? And what about what’s good for someone he might negligently injure or kill? What if he injured someone and they became a quadriplegic? How far would a $100K renters policy go? You think he’s less likely to be sued because he only has $100K in insurance? His earnings over 20 years following such an accident would be far, far greater than that. There is more at stake here, from a social/moral standpoint, than simply protecting the parents’ insurance and assets. We have a moral obligation to protect others from our negligence. From an insurance perspective, how can we provide the broadest coverage and highest limits most cost effectively? To me, the answer is pretty clear.
The bad idea is the assumption that insurance and higher limits solves the problem. What I wrote is that you did not need different limits because a son or daughter go to college. Big difference. I also stated that before wasting money on insurance you first should do some asset protection and veiling. Segregation, quarantine and isolation of risk does not provide for commissions and insurance premium but they do mitigate rislk.
Since you are writing that you should buy excess then consider the following. I note you use the word umbrella. Does not exist. You may have a following form and you may have some drop down but a true bumbershoot cover that has everything including, what is excluded under the primary subject to a separate retention. These are as extinct as a dod doo bird.
If you purchase the excess then you are saying I have exposure equal to these higher limits. Pray tell and advise if you believe I am equally exposed for all events not covered and how you intend to meet the liability requirements for this that you have established and collected commission for so stating. My liability is the limit you have stablished as abench mark so I have that same liability benchmark applicable whether the policy repsonds or not. Getting risk mangement advice from an agent of a company who is paid to sell more insurance is about as objective as an evolutionist defending their failed theory.
Again fear mongering is not the correct practice of risk. Has the family exposure changed that we have to provide millions because he has a car at school and occupies space? That is funny.
“The bad idea is the assumption that insurance and higher limits solves the problem.”
What problem does a $100K liability renters policy solve when someone kills or permanently disables another person and could have been covered by $3.5M in insurance?
“What I wrote is that you did not need different limits because a son or daughter go to college. Big difference.”
I didn’t get different limits. I had the $3.5M while he was living at home. I simply extended that to him at college, the same coverage and limits he had before, rather than reduce his coverage to $100K as some carriers say is what happens when a kid goes to college.
“I also stated that before wasting money on insurance you first should do some asset protection and veiling. Segregation, quarantine and isolation of risk does not provide for commissions and insurance premium but they do mitigate rislk.”
And abdicate any responsibility to someone whose life you’ve just ended or changed forever? Insurance both protects assets and income AND provides for others that you may harm. If you want to forgo insurance and put your assets and income on the line, that’s fine, but for me, trying to keep something away from someone who morally has the right to be compensated by me is not how I prefer to live.
“Since you are writing that you should buy excess then consider the following. I note you use the word umbrella. Does not exist. You may have a following form and you may have some drop down but a true bumbershoot cover that has everything including, what is excluded under the primary subject to a separate retention. These are as extinct as a dod doo bird.”
Bill, you do not appear to be in touch with the marketplace. I can even get a true umbrella in the E&S market. I had a USLI umbrella for several years because it was the best one I could find and I paid a premium for it. No umbrella has ever covered EVERYTHING excluded by the underlying and you are correct that many “umbrellas” today are little more than excess policies, but not the ones I buy. They exist.
“If you purchase the excess then you are saying I have exposure equal to these higher limits. Pray tell and advise if you believe I am equally exposed for all events not covered and how you intend to meet the liability requirements for this that you have established and collected commission for so stating. My liability is the limit you have stablished as abench mark so I have that same liability benchmark applicable whether the policy repsonds or not. Getting risk mangement advice from an agent of a company who is paid to sell more insurance is about as objective as an evolutionist defending their failed theory.”
You need to hang around with some REAL agents! I know lots that WILL “serve you first.”
“Again fear mongering is not the correct practice of risk. Has the family exposure changed that we have to provide millions because he has a car at school and occupies space? That is funny.”
It’s not fear mongering, it’s being responsible and a good citizen. You apparently misunderstand…I did not increase my limits when he went to college. Those were the limits I carried when he was home. My choice in coverage and limits is based in part on assets and income, but also on loss potential and how much I can reasonably afford to carry to protect the public from our negligence that may cause them catastrophic loss.
Bill life has risks. To respond
1. You put a target on yourself with thise limits.
2. You ignore what is excluded or not covered and you offer nothing to mitiagte that.
3. You deny there is any answer but more insurance premium and commission.
4. If I do not have multi million coverage I am a bad coitizen? That is really funny.
5. So you determiend you were worth 3.5 million insured How much are you worth for events not covered or inured under that tower of coverage? How do you plan top proetct for that? Or does it not matter because only insurance matters. That is both sad and funny.
6. And how many claims were paid in the last three years nationwide involving a son at college? And why do you think 3.5 million will work if it is that bad?
7. Listening to an agent disucss risk management is a non starter because his master is an insurance carrier.
As a long time agent and risk consultant, Charles Ford comments suggest he has never served on the front lines of an insurance agent who is continually balancing many different factors when making coverage recommendations to our customers. Permit me to illustrate how his comments do not reflect the real world of an independent insurance agent.
“I would always recommend a separate policy and HO 4 and a separate auto policy for the kid as well if practicable form a cost standpoint.”
Based upon my experience, this recommendation may seem like it makes sense but, if the limits were the same, on both policies, you are essentially doubling the costs. If you do not match the limits, you may place the respective insureds in legal and financial jeopardy if the limits are not adequate. The adequacy of limits is a large challenge for agents. In the real world, I did not make the decision of limit adequacy for the insured. Rather, I described the scenarios and provided premiums for a range of limits. Based upon my training, a failure to offer these limits had the potential to expose me to liability. Limit adequacy has been, is, and will be a major challenge for all parties to the insurance transactions. At the end of the day, the best test for limits is whether they are adequate to cover any severe losses that the insured might encounter.
“If the family needs higher limits then first they should do asset protection and veiling.”
In my experience, these techniques are most applicable to the top 1-5% high asset folks in our country. There is some questions in my mind about how well these techniques actually work in the real world. However, for the vast majority of folks, insurance provide the best mechanism to protect themselves from the occasional severe loss and give them piece of mind they would not lose their limited assets in the event that a unexpected large loss occurred. These devices for risk avoidance may be legal but their ethics raise questions in my mind. Does society want to condone the intentional freezing of assets and leave injured parties unable to collect their legitimate damages? Who pays? As a front line agent, I found most customers more oriented to making decisions that reflected their wish to provide for injured parties for whom they were personally responsible. ( In our recent wildfires, I was fascinated by folks who either underinsured or went bare, but expected someone to pay. Their recovery was just much more complicated than those folks whose agents had properly insured them for this contingency.)
“7. Listening to an agent disucss risk management is a non starter because his master is an insurance carrier.”
Really??? First, as an independent insurance agent, I serve in two capacities: agent and broker. As a broker, my master is not the insurance carrier. As an agent, I owe a higher duty to the insurance carrier but I also have a duty to my customer to provide sound, professional insurance counsel. Based upon almost fifty years of insurance experience, insurance agents provide extensive risk management services on behalf of their companies and in addition to their customers.
Bottom line: my world view of the insurance marketplace and the services that agents provide is very different than Mr. Ford’s comments.