Author: VU Faculty

"The insured's 21-year-old daughter is moving off campus to an apartment and the property manager is looking to confirm coverage. She is a full time college student and her parents have a 1991 ISO HO-3 policy. When not at college, she is a resident of her parents' household. She is signing the lease. The HO underwriter is telling us that she needs her own HO-4. I said it is not necessary since she is an 'Insured' under her parents HO policy. The underwriter is insisting that, since she is signing the lease, she must have her own policy. Can you shed some light on this?"

There are quite a few VU articles about kids at college. Rather than list them here, simply search the VU for "college" and they'll come up on the search results. We also ran this question by the VU faculty and got the responses below.

She needs an HO-4. She needs named insured status. Extending coverage from dad's policy is not the way to go.

She's an adult and should have her own policy. Don't buy problems by insisting she's covered on your policy. Seems like she us setting up her own domicile.

If your daughter lives with you when she is not at school and your home is her primary residence, then the college apartment would be a temporary residence and it would qualify as an "insured location."

Also notice that the exception to the contractual exclusion provides coverage for contracts where "an insured" assumes liability for ownership, maintenance or use of an "insured location." It does not state that the "named insured" must assume liability.

With my clients we ask the underwriters to list the student apartment as an "insured location" but they do not charge additional premium for it.

If the underwriter insists that the Named Insured must sign the apartment lease then ask the underwriter to add your daughter as a Named Insured along with you – assuming that you would be comfortable with that.

The underwriter's right, she needs her own policy. Probably for the wrong reason, but right nevertheless. I agree that the temporary rental of a student apartment probably doesn't take her out of your household, but at almost any moment the "temporary" could become "permanent," at which time the coverage extended by your policy will end, perhaps without anybody noticing. That's why we always recommend a separate policy when a dorm occupancy changes to an apartment lease.

You have a company on record (it seems) saying your HO-3 won't cover the daughter. If they say that before a loss, I'd expect the same response after a loss. Why fight the fight now or then? Buy the HO-4; it's just good risk management anyway and the cost is next to nothing compared to the annual cost of college.

That said, almost every court case I have read says college kids are residents of the parents' house. The liability extends to the kid's place automatically and Coverage C is provided for 10% of the policy limit.

I still opt for the HO-4.

College students do generally still qualify as "insureds" under their parents' homeowners policy. As such there's up to 10% of Coverage C available for their personal property at a college residence, as well as personal liability for their activities. Liability coverage for college residences is not clearly provided, however. The definition of "insured location" provides liability for non-owned residences that are "temporary," so there's a good argument that college dorms are covered premises since students have to leave them periodically. But, college apartments, whether rented to the parent or the student are not clearly covered and may not qualify as "temporary" as they're leased. Extending liability to a college residence by showing it in the declarations also may not help as it extends coverage to other residences of the named insured, not other insureds. An HO-4 is the best coverage option.

Reading the lease to see what the tenant has assumed responsibility for is also a good idea. 

The daughter needs her own HO-4. There are scenarios where the 21 year old MAY meet the definition of "insured" in the 1991 Version of the HO3, but I see a plethora of opportunities for a carrier to take advantage of the opportunity to argue that the 21 year old is NOT an "insured."

I am hopeful that this licensed insurance professional is not saying the same thing to a client. An HO4 is a $250 proposition. Also, a claim on the HO4 will result in 20% increase on $250 in premium – a claim on his HO3 will result in 20% increase on his $2,500 premium. I am not very good at math, but even I can appreciate that difference.

Also, it is very likely that this daughter needs to be the Named Insured ("you") on her own Personal Auto Policy (with adequate limits). As she is VERY LIKELY not a "family member" on the PAP and she is only an "insured" on the PAP's Part A – Liability when she is using Dad's "your covered auto." As such, Dad's liability coverage would not follow her when she is responsible for an auto accident while driving any other vehicle – a roommate's car, a work car, a rental car. She would also NOT have Dad's Med Pay, UM/UIM, or physical damage available for any vehicle other than Dad's "your covered auto."

Your daughter is no longer a resident of your household when she signs the lease. Please read the insuring agreement and the definitions describing residency. The liability will not extend to a non-resident. Family member is defined as a resident of your household. I agree with the underwriter that your daughter needs the H0-4. I also recommend that you add an endorsement to her policy for the computer. The coverage changes from named perils to special form which includes dropping the item on the concrete. Don't forget to add the value of the software.

An HO-4 in the student's name is the best way to handle this situation, as there may be unintended gaps in coverage when relying solely on the parents' homeowners policy.

The key question that must be asked before confirming coverage under the parents' homeowners policy is this: Does the student meet the definition of "insured" on the homeowners policy? After that question is answered, the next task is to determine whether any coverage exists for property and liability exposures away from home, and the extent of that coverage, by reviewing the insuring agreements, other definitions, and the exclusions.

In the ISO homeowners policy, the definition of insured includes the traditional wording to cover a relative of the named insured who resides in the named insured's household. It is generally accepted that students living on campus are residents of their parents' household. Based on court decisions in many jurisdictions, however, the real test is whether the absence of a person from the household of the named insured is intended to be permanent or only temporary - i.e., whether there is physical absence coupled with an intent not to return.

Property Exposures. The ISO homeowners policy covers personal property owned or used by an insured anywhere in the world, subject to a maximum amount equal to 10 percent of the Coverage C Personal Property limit when the property is located at another residence owned by or rented to the insured. There is a theft exclusion related to personal property situated at other residences except while an insured is temporarily residing there. When the student comes home for the summer, this exclusion may be a problem that will require consideration of a separate tenant homeowners policy.

Liability Exposures. The ISO homeowners policy covers the insured's legal liability for bodily injury and property damage arising out of an insured location. To be considered an insured location (a defined term), a residence must meet only one of the 8 parts of the definition. In most cases involving a dorm room or a rental for a semester or school year, the student's residence will meet the definition by being a premises "where an insured is temporarily residing." For long term rentals, there is another possibility. The definition of insured location includes a premises you (the named insured) use as a residence which is shown on the declarations page or which you (the named insured) acquire during the policy period for your (the named insured's) use as a residence. Obviously, if you can convince the underwriter that an apartment rented by the student meets this definition (and he or she confirms this fact in writing), the best approach is to describe the location in the declarations and charge a little extra premium as soon as the insured tells you about it.

Do you see the potential gaps? Buy an HO-4.

The 1991 HO form provides insured status to relatives who are residents of your household. The questions is whether a "full-time" student in a leased apartment remains a resident of the parents' household. The terms "resident" and "household" are undefined and, therefore, subject to the common, everyday usage of the terms. While the terms suggest co-residency or being a part of a family unit, the term "residing" is referred to the Alabama Supreme Court in State Farm v. Hanna, 1964 as "an ambiguous, elastic or relative term, and includes a very temporary, as well as permanent, abode." While contra preferentum is the prevailing method of interpreting ambiguous words or phrases in insurance policies, it take judicial review to answer the question of residency in a specific circumstance. So the insurer could take the position that non-residency is the case and it would require litigation to override their position. To remove doubt, either purchase the HO-4 or find another insurer that accepts the continuation of residency for full time college students.

It seems to me that signing a lease creates a new household, in which case a separate HO-4 policy is appropriate. In any event, if your current underwriter is saying liability coverage will not be provided under your customer's policy, the choices are: to shop the coverage and find an insurer that will confirm your concerns are addressed under their form, or to write a new policy for the daughter. My clear choice would be the latter.

First of all, there are several VU articles that address this and related issues:

"Kids in College…Time for an Insurance Review"

The article above links to two other articles.

Second, your current personal lines carrier has spoken about their position. Right or wrong, you can expect a claim denial by relying on your existing insurance. You can either move your daughter to her own policy or find another insurer.

Third, I was insured with this same carrier when my son went to college. He was in the dorms his first 3 years, as required by the school and he had no car on campus his first year, as prohibited by the school. His last 3 years he had a car on campus. His last year, he moved to an apartment near the campus.

During this entire time, his auto (which my wife and I owned) was insured on our family's auto policy and rated based on its garaging location near the campus. As for the homeowners coverage, there was nothing in the HO policy that distinguished between living in a dormitory or in an apartment while at college. Perhaps there are policies that do, but this one and the pure ISO forms do not. There is ample case law, though it might vary by jurisdiction, that a child at college is there "temporarily" and is still considered a resident of the family's household. In addition, there is case law that says you can be a resident of more than one location. To remove all doubt, we added the apartment location to the Dec. page as an "insured location," though I don't believe that was necessary, nor did the underwriter, but she thought it was a good idea.

In addition to coverage under our family's PAP and HO policies, we had a $2M personal umbrella. So did our son. By extending coverage from our PAP, HO, and PUP policies, he had about $2.5M in policy liability limits. Do you know what that would cost if he had his own PAP, HO and PUP (which he does not, so I know what it costs)? It's a mistake to think a college student in an apartment only needs the $100K or so of liability coverage under an HO-4 policy. If you write an HO-4 for a kid at college, you'd better also write an umbrella IF you can find a carrier to do so…you might have to hit the E&S marketplace and now you're talking about serious premium for an exposure you might easily be able to cover under the existing parent policy forms.

I believe extending your current coverage in a case like this is the best way to go, but an insured must be cautioned that when the child is truly on his or her own, they will need their own coverage. If they cease meeting the "full time" student or age requirement in current HO forms, they will also need their own coverage. Again, it's a matter of getting the carrier to agree to this or moving the account or buying an HO-4. But, if you go the HO-4 route, you'd better jack up the liability coverage significantly or you could have your child (or you) trying to pay off a huge liability claim for the next 20 years and any college loan debt could pale in comparison to a legal liability debt.

Last Updated: August 8, 2016