R&R Insurance Blog

It’s no secret, the average age that adult children continue to rely on their parents for financial support has fluctuated greatly over the years. College has become astronomically expensive, apartments and cost of living are on the rise, and the burden of becoming financially independent forces many adult children to remain dependent on their parents well into their late 20’s and early 30’s. These complex living situations can expose coverage gaps with many personal insurance policies including Auto, Homeowners and Umbrella.

Personal Auto Policy

Exposure on the family’s Personal Auto Policy can be dependent on many factors; where the adult child lives, who a car is titled and registered to, and who is listed on the policy as a Driver, Named Insured, and Additional Named Insured.

On most traditional Personal Auto Policies, the definition of who has coverage includes "Family Members". Family members are typically limited to a “person related to you by blood, marriage or adoption who is a resident of your household”. When a specific vehicle is titled to and insured by the parents alone, but in possession of a child who is no longer a resident of the parents household, this can create a gap in coverage. If a vehicle is co-titled between the parent and child, or titled solely to the child, a gap in coverage can exist if the child isn’t properly listed as a Named Insured or Additional Insured on the parent’s policy. A gap in coverage can also exist if the child isn’t listed properly on a personal auto policy and is injured as a pedestrian or a passenger in another vehicle with inadequate insurance limits.

Homeowners Policy

Exposure on a family’s Homeowners policy can include the adult child’s personal contents and personal liability. Coverage can be dependent on where the adult child lives, their age, and their status as a part-time or full-time student. Contents can include clothing, furniture, electronics, sports equipment, and other personal belongings.

Most traditional Homeowners policies list the definition of an “insured” as “residents of your household who are your relative”, but typically extend coverage to addresses away from the primary home for “a student enrolled in school full-time, as defined by the individual school, and is under the age of…” Different companies have different age limits, but typically you can expect the limit to be somewhere between 24 and 29. This can present coverage gaps on personal contents and personal liability as many adult children are attending college and remaining dependent on their parents well into their 30’s. Part-time students living away from home can be exposed to the same coverage gaps. Additionally, most Homeowners policies have smaller defined limits for “personal contents away from the primary residence” creating a need for a separate Renters policy to adequately cover the adult child’s personal contents.

It is also becoming increasingly common for parents to provide a residence for their adult children, including renting them an apartment or purchasing them a home or condo. The parents may fund the purchase but the adult child is most typically the primary resident and coverage may not extend from the parents primary Homeowners policy. In many cases the adult child is the only name listed on the lease or deed which requires them to carry the primary insurance coverage.

Umbrella Policy

When coverage gaps exists on either Auto or Homeowners policies, these gaps can also translate to the family’s Umbrella policy on large losses creating a massive financial impact on both parents and the adult child. Even if the adult child currently has limited income or assets, courts have the ability to garnish future wages creating a long-lasting impact on the adult child’s financial future.

It is extremely important to understand coverage limitations and exclusions and discuss your unique family situations with a qualified Personal Insurance Consultant at R&R. We can explain coverage limitations, identify gaps, and present solutions to ensure that your all members of the family are properly protected. In many cases it is imperative that an adult child obtain their own Personal Auto Policy, Renters Policy, or Homeowners policy, and we can assist in finding the most affordable coverage to meet their needs.

Below are real-world examples of situations where coverage gaps may exist:

• Your adult child is not properly listed on a Personal Auto Policy and they borrow a friend's vehicle to run to the store. On the way, they hit a pedestrian crossing the road. Your child was unaware that the friend had no insurance on the vehicle and has no liability coverage for the injuries to the pedestrian.
• Your adult child is not properly listed on a Personal Auto Policy and rents a truck to move some furniture. They choose not to buy the insurance offered by the rental company. Again, there’s no coverage for property damage to the rented truck or bodily injury to others if there’s an accident.
• Your adult child is not properly listed on a Personal Auto Policy and is hit by an uninsured motorist while crossing the street. There are no medical payments or uninsured motorist's coverage for their own injuries.
• Your adult child is not properly covered on your Homeowners policy and has a fire at their rented apartment. There is no coverage for damage to their personal contents or liability for damage caused to other units in the building.
• Your adult child is not properly covered on your Homeowners policy and badly injures another golfer on the golf course. Since they have no liability coverage, there is no coverage for injuries to the other party.

As a homeowner, you are more connected than ever – your phone, computer, network, security system, even household appliances and equipment. These connections have enhanced our everyday lives, but they’ve also opened homeowners up to a wide new range of Cyber Attacks, Extortion, Fraud, and Data Breach. Adding Cyber Insurance to your Homeowners policy can help mitigate the risk created by the modern dependency on data.

Some of the most common Cyber Claims include:

• Cyber Attacks – A targeted attack or unauthorized access or use of a computer or connected home device, including viruses and malware
• Cyber Extortion – A demand for compensation based on a credible threat to disable, damage, or deny access to your devices, systems, or data, including an offer to restore functionality in exchange for payment
• Fraud – Unauthorized use of personal information including credit cards, checks, or account numbers. This can include accepting counterfeit currency or falling victim to criminal deception.
• Data Breach – The theft, loss, release, or publication of personally identifiable information in your care, custody, or control.

Cyber Insurance Endorsements can include the following coverages:

• Identity Fraud Expense Reimbursement and Recovery Assistance
• Data Recovery and System Restoration
• Credit Card Fraud, Forgery, Cyber Crime
• Cyber Extortion and Cyber Bullying
• Breach Notification Costs
• Cyber Protection Legal Expense and Damages Reimbursement

If you haven’t discussed your individual Cyber Risk, an experienced Personal Lines Insurance Consultant from R&R can explain the various coverage options and limits that are available to you. We can help design a plan to meet your individual needs.

4 Real-World Claims Examples

1. Cyber Attack An insured opened a file in an email he received that contained a virus. The virus affected their computer, requiring the need to hire an expert to reformat the hard drive, reinstall the operating system, and restore data from a backup.
   Paid Loss after Deductible: $1,200
   
   
2. Cyber Extortion An insured received a ransom email on their computer after they noticed that all files were locked. The email demanded a payment of $2,000 to obtain the decryption key. If the insured failed to pay within three days, the price would go up to $3,000. After that, the decryption key would be destroyed and any chance of accessing the files would be lost forever. After consulting with an expert and approval by the insurance company, the insured decided to pay the ransom.
   Paid Loss after Deductible: $1,500
   
   
3. Fraud An insured received an email that appeared to be from a grandson, stating that he had been in a car accident and was in trouble. He was facing criminal charges and needed payment for a lawyer. 20 minutes later the insured received another email from someone identifying himself as his grandson’s lawyer, including an accident report and the costs to cover the damage. According to the email, the injured individual agreed to accept $5,000 to cover costs. The grandfather was told that the victim would sign a release as soon as that amount was wired and the insured’s grandson would walk away with a clean record. The money was sent as instructed. The next morning, the insured called his grandson and learned that none of this actually happened; he had been defrauded.
   Paid Loss after Deductible: $4,500
   
   
4. Data Breach An insured volunteers at her children’s school and one of her responsibilities is to keep the teachers aware of students’ birthdays and lunch account balances. The lunch account information contains credit card numbers and other personally identifiable information. She keeps track of all this information on a spreadsheet stored on her personal tablet. She does not secure the tablet with a password so the critical data is unencrypted. While on a field trip, she lost the tablet. After consulting with her lawyer, the insured learns that she must notify people that their personally identifiable information was compromised.
   Paid Loss after Deductible: $4,200