How to provide Auto Insurance for your child while away at college.
October 26, 2017- by Willy Hoffman Jr, CIC
First, I want to explain the most common miss-understanding about Auto insurance. “Listing” a driver on the policy DOES NOT provide any coverage for that driver. Listing a driver ONLY allows the company to charge a premium for that driver. Who is covered by the Auto policy is determined by the actual policy language. Most policies state something like, “We cover you (the person listed on the policy as the Named Insured), your spouse while a resident of your household, and your children while residents of your household”. Most companies will consider a child who is away at college but otherwise still lives with you as a “resident of your household”. You may have noticed that it does not say anything about covering those drivers listed on the policy. For example, if your child graduates and gets their own apartment, they are no longer covered under your Auto policy, even if you have them “listed” as a driver.
It is also very important to understand the difference between being just covered as a driver of a car and being an “Insured” on an Auto policy. Anyone you let drive your car (except people in the Auto trade, like a mechanic or a dealer) is automatically covered by your policy while driving your car. They are NOT however an “Insured” under your policy. For example, your neighbor borrows your car, parks the car, and then is walking across a street and gets hit by a drunk driver who leaves the scene. Your policy would not cover them as they were not driving your car. They are not an “Insured” under your policy as they are not a family member and don’t live with you. If they have their own Auto policy, they would be covered under their own policies Uninsured Motorists (UM) section for their medical bills, lost income, emotional distress, etc… However, if they don’t have an Auto policy, they would have no coverage other than their health insurance policy. I can’t stress this point enough; you always want your child to be an “Insured” under an Auto policy. This way they are not only covered for Liability (damage they cause to others) when they are driving a car, but they are also covered for damage done to them by autos with either no insurance or not enough insurance, while riding in an Uber, riding with a friend, riding a bicycle, or just walking across a street.
Here are some scenarios:
- You own the car, your child is in college, your child has the car at college – Assuming your child is already a “listed” driver on your policy, you don’t need to notify your carrier/agent or make any changes. As noted above, as long as they still live with you while not in college, they are still an “Insured” on your policy. For example, my son just started at Colgate, but all of his mail still comes to our house, he will be coming home for Thanksgiving, Christmas, and the summer. If he were to rent a house of campus next year for school, but otherwise still lives with us, I think he is still an “Insured” under my policy. It is important that your child understand that if they let someone else drive your car, that YOU are the person primarly responsible for any accidents they cause, not the driver. Certainly not saying you never let someone else drive your car, but they need to understand the risk.
- Should you put the car in your child’s name so they can get their own policy while away at college? – I typically do not recommend this approach. Yes, this can help protect you from Liability claims because if your child is over 18, driving their own car, and they cause an accident, it would be difficult for the injured parties to sue you. If you have assets you want to protect, I would recommend an Umbrella policy with a sufficient limit based on your assets and what you can afford. The problem is, most people put the car in the child’s name and they purchase a policy for the child with minimum Liability and UM limits. They figure the child does not need higher limits as they don’t have any real assets to protect. I strongly disagree with this theory. First, if your child is in college, they hopefully will have future earnings, which are themselves and asset that needs to be protected. Second, if your child is injured by a drunk driver with little or no insurance, you don’t want UM limits of only $25,000. This approach of buying a separate policy for the child almost always results in the child having much lower limits (for example, they would no longer be covered by your Umbrella policy), but also usually does not really save money. Keeping the car in your name and on your policy means the car benefits from the multicar discount you have on your policy, as well as all the other discounts you might have, like the Home and Auto discount. If your child gets their own policy, they will not get these discounts.
- You own the car, your child is in college, your child does not take car to college – In this case, I would leave the child as a “listed” driver, but I would call your carrier/agent and let them know that he/she is away at college without a car. Most companies do give a discount if a child is over 100 miles away at college without a car. I strongly recommend against removing your child from the list of drivers on the policy. Yes, that will definitely save you money, however, you could leave your child with no coverage. As I noted above, most companies view a child away at college as still being a resident of the household. However, if you call the company and tell them that your child is no longer a member of your household and to remove them from the policy, if you have a claim, it would then be hard to argue that your child really was a member of your household.
- Your child has now graduated college – This is where it gets tricky. If they move back in with you, they are still covered under your policy as a family member living with you. However, if they go to grad school or get a job and move out to their own apartment, they are no longer a member of your household and are no longer covered under your policy (even if you still keep them listed as a driver). This gets tricky, because they often take your car with them to their new apartment. In this case, I would recommend you transfer the car to their name and let them get their own policy. If they don’t have a car, I strongly recommend they get a Named Non-Owner Auto policy. It provides the same Liability and UM coverage you get on a typical Auto policy; it just does not charge you for the Physical Damage coverages (Comp & Collision) since he does not own a car. But this way he would have coverage if injured by a drunk driver while riding in an Uber or with a friend.
If you don’t have any agent to help guide you through these complex coverage issues, you should!