(This post previously appeared in the Aug. 14, 2014 issue of IIABNY Insider.)
“I suppose I could collect my books and get on back to school.” – Roderick David Stewart, “Maggie May”
It’s already mid-August. The New York Jets have finished up their training camp in Cortland and are headed down I-81 toward East Rutherford (the Giants, of course, have forsaken Albany and stayed home.) The New York State Fair opens next week. The stores are alive with back-to-school sales. That weeping and moaning you hear is coming from … teachers.
Yes, faster than you can say “dining hall food,” it will be time for the younger set to head back to schools and colleges. And that means it’s time to think about insurance. Why? Because it’s always time to think about insurance. Here are some insurance issues to discuss now with your personal lines clients who are parents of college students:
The Basics: Do the Parents’ Policies Cover the Student?
Probably yes, though it depends on the student’s enrollment status and age. The ISO Homeowners 3 Special Form (HO-3) policy covers a student enrolled in school full-time, as defined by the school, who was a resident of the named insured’s household before moving out to attend school, provided the student is under the age of 24 (if the student is the named insured’s relative) or 21 (if the student is in the named insured’s care or the care of a relative who resides in the named insured’s household.) The ISO Personal Auto Policy automatically covers residents of the named insured’s household who are related to the named insured by blood, marriage or adoption, including ward or foster children. There is no age limit, but the individual must reside in the named insured’s household.
Coverage for Personal Property in a Dorm or Apartment
Does the parents’ policy cover it? Yes, but the ISO HO-3 caps the amount of coverage at 10 percent of the limit of liability for Coverage C or $1,000, whichever is greater. For example, if the policy declarations show a limit of $100,000 for Coverage C, the student’s property is covered for up to $10,000.
Is there a way to buy more coverage? Yes. ISO endorsement HO 04 50 05 11, Increased Amount of Insurance for Personal Property at Other Residences, increases the limit of liability up to a stated dollar amount for property at a residence scheduled on the endorsement. An additional premium applies for every $1,000 in additional coverage.
Don’t forget that college textbooks, which now cost as much as a good seat at Yankee Stadium, are covered personal property.
What is it? ISO endorsement HO 23 13 05 11, Special Computer Coverage – New York.
Why buy it? The unendorsed ISO HO-3 covers an insured’s personal property, but only for specified causes of loss. It will cover a stolen laptop, but not one that gets dropped, gets fried by a power surge, or that gets a (ahem) beverage spilled on it. This endorsement changes coverage for computer equipment to include special causes of loss. Some carriers may also apply a reduced deductible to computer equipment.
Coverage for Damage to a Dorm Room, Dorm Furniture, or Apartment
Does the parents’ policy cover it? Yes, but only for a few causes of loss. The Property section of the HO-3 policy does not cover damage to non-owned premises at all. The Liability section covers the insured’s liability for damage to property rented to, occupied or used by or in the care of an insured only if the loss is caused by fire, smoke or explosion. Coverage does not apply to any other cause of loss. If Joe College consumes one too many Dr. Peppers and uses a dorm couch as a trampoline, thus causing it to crumble, there is no coverage. If he lives in an apartment and, while channeling his inner chef, torches the building beyond recognition, the loss is covered.
Is there a way to buy more coverage? ISO does not offer any endorsements to broaden the coverage. Some insurers might have proprietary forms or endorsements. However, even if the loss is covered, we need to talk about …
Limits of Liability
What’s the problem? The basic limit for Personal Liability Coverage is $100,000. If Joe fries his building crispy, the landlord will have some thoughts about the cost of rebuilding and lost rents. How large will that bill be? Probably a whole lot more than $100,000.
What’s the answer? A higher Personal Liability limit. The good news is that, to quote the British tunesmith Yusuf Islam (nee Cat Stevens), “The first cut is the deepest.” According to ISO rules, the premium increase for going from $100,000 to $200,000 is 15 percent; the cost of going from $100,000 to $500,000 is 35 percent. Five times the coverage for 35 percent more money. Not so much a bad deal. And let’s not overlook an umbrella policy, such as the RLI Personal Umbrella Policy offered through IAAC, IIABNY’s member services division. This leads us to another subject of an umbrella policy …
Limits of Liability
What’s the problem? Every parent’s worst nightmare is the phone call late at night announcing that a child has been in a car accident. If your son or daughter is behind the wheel at the time, he or she may have legal liability for injuries to other victims and property damage. New York law doubles the liability limits on a personal auto policy for deaths resulting from a car accident. For example, if the limits are $50,000 for injuries to one person and $100,000 for injuries to multiple people, those limits become $100,000/$200,000 in the case of death. It’s not hard to imagine that $200,000 getting exhausted pretty quickly when there’s a car full of kids.
What’s the answer? Same as above – higher limits and an umbrella. And a whole lot of hope and prayers that they’re never needed. On a related note …
No Fault Insurance – Limits of Liability
What’s the problem? The basic New York no-fault insurance endorsement provides $50,000 in first party benefits for medical expenses, work loss and related expenses. Medical expenses alone can chew up $50,000 pretty quickly, especially if surgery is required.
What’s the answer? The Additional Personal Injury Protection Coverage – New York endorsement, ISO endorsement PP 05 88 01 14, increases first party benefits to $100,000 or more. Many insurers offer up to $150,000, but New York law does not specify a maximum limit, so they are able to offer more. The cost of additional PIP coverage may be surprisingly low.
Heading back to college brings mixed feelings for students and parents alike. Students because the carefree days of summer are over but they get to see their friends again. Parents because they are saying goodbye again to their children while saying hello again to lower grocery and laundry bills. We all hope that the students have a safe and educational school year. If something goes wrong, though, you will rest easier knowing that you discussed these options with your clients.