Does Your Homeowners Insurance Cover Your Kids In College?

Getting a child ready for college is stressful and exciting and insurance is probably the last thing on your mind. That’s expected; after all beyond all of the emotions you feel, you still have to help them buy bedding, a laptop, and all the dorm room decorations and necessities. But after you have spent a small fortune on their personal items, do you wonder if your insurance policy will cover these things while they are off at school? Unfortunately the answer is that it depends. And this vague answer means you really need to be sure that you are clear on the rules of the NC homeowners policy as it applies to children away at school.

A few years back, the North Carolina homeowners insurance policy form was changed and one of these amendments was a change in the wording regarding your child’s possessions while off at school. The new policy form changed the definition of an insured, (a person covered by the policy), to state that a student who lives away from your home is covered as an insured only if her or she attends school on a full time basis and is either your relative and 23 years of age or younger; or not your relative and 20 years of age or younger if still in the care of an insured. An older student or a part time student who lives away from home may be added to the policy as an additional insured for an additional charge on your policy.

Now I’ll be the first to admit that the last sentence in that paragraph above was a long stringy one that really ought to be read a second time. Go ahead and reread it, then I’ll show you just how people get caught by legalese in insurance policies. So, go ahead, reread the paragraph above, then come back here, I can wait.

Ok, the easy part to understand, and the part that most people notice first is the age parameter. You probably thought, ok, my child is 19 years old and is also my relative so my policy protect them. But did you also notice that the student must be a full time student? So what, surely your kid is full time. But what does full time really mean? I’m sure when you pay that tuition bill you had no doubt that you were paying for a full time student. But it doesn’t matter what you think is full time, what really drives the coverage is how the insurance companies define full time student. I have talked with several insurance company claims departments to better understand the answer to this question. And what they tell me is that insurance companies will go by the child’s school’s definition of a full time student. And that definition can vary a great deal from one school to the next. Some schools might define a full time student as one taking at least 12 credit hours that semester while others might require your child be registered for 16 or more hours to reach that designation. Summer school can have its own unique designation as well. This means it is up to you, the parent, to find out for yourself where you stand in your own particular situation and plan ahead for it with your homeowners insurance policy.

So what do you do to protect your child’s posessions if you determine that he or she is not covered by your homeowners policy? There are two options for you. One option is to add the endorsement number HO 0458 to your homeowners insurance policy. This endorsement will name your child as an insured. This endorsement usually costs around $75 per year. The other option, and I like this one better, particularly for older students, is to buy an HO-4 insurance policy for your child in his or her name. The HO-4 form, sometimes referred to as a tenant homeowners policy, is a homeowners policy designed for renters. This will allow them to choose a contents property limit and a liability limit as well as a deductible that best suits them. This may cost more or less, depending on the amount of coverage you need for your child but it can stay with them for as long as they keep renewing and updating it. I like this option also because it teaches your child early on, just how important it is to have both property and liability insurance for their particular household at all times. This also removes the doubt about coverage as the child moves back and forth and out to other places in the Summer and so on. As long as they keep renewing and updating the address on that policy, they will have protection.

It’s exciting and sometimes emotionally exhausting to get one of your children ready to go to college, believe me, I’ve done it 3 times now. And for those of you with children in college, I don’t want you to forget to carefully consider the insurance issue. Losses happen in colleges just as anywhere else and you may not be able to easily afford to buy all of their possessions all over again. Here at Clinard Insurance Group, located in lovely Winston Salem, NC, we try our best to educate our customers and the general public about insurance issues that affect their lives. We want every insurance consumer to be an informed buyer. If we can help you with your auto insurance, your home insurance, your business insurance or even your life insurance, please call, us, toll free, at 877-687-7557 or visit us at www.ClinardInsurance.com.

Consent To Rate Letter – Don’t Just Sign Over A Blank Check To Your Insurance Company

The consent to rate letter in North Carolina is the legal way for your insurance company to get you to agree to let your insurance company charge you more than the highest rate allowed by the NC Insurance Department. If you receive this form from you insurance company, don’t sign it without first checking in with an independent agent that you trust. There are usually many much better options than to sign this letter and watch your rates skyrocket. I’ve written about the consent to rate letter and what you should do in the past and you can, click here to read past blogs. Now, however some insurance companies are employing the consent to rate letter in a more insidious fashion. Their new technique uses this form as a way to get around ratemaking rules in North Carolina. Be careful; don’t sign this without a second opinion.

To understand the consent to rate form, it helps to understand how insurance rates are generated at in North Carolina. This state is unique in that the NC rate bureau holds most of the power in the rate making process. Here, the rate bureau decides the maximum rate that insurance companies can charge for each type of policy. After that, each insurance company then files their deviations from this rate. Usually, the rate bureau maximum rate is far above what any insurance company would be able charge for a policy and still be competitive. What happens is that insurance company rates are discounted down from the maximum rate, often as much as 55%. There is a loophole to the maximum rates that can be charged though. If an insurance company can get you to agree in writing to pay rates above the rate bureau maximum rate, then they are allowed to do so. The consent to rate form is the vehicle for getting your written consent. So, whatever you do, don’t sign a consent to rate form without first exploring all of your alternatives.

There are legitimate uses for the a consent to rate form. Imagine if you have had a few insurance claims and you are not able to buy insurance anywhere from any other company because they all think you are just too risky for the rates that they have filed with the rate bureau. Using the consent to rate letter allows them to charge a high enough rate to accommodate the riskiness of your particular situation. In that situation, the consent to rate form can allow you to buy insurance when otherwise you might not be able to.

Right now, the marketplace for homeowners insurance in NC is currently in a state of turmoil. The biggest reason for this is because the high risk beach houses that are covered by the market of last resort provided by the government do not have a high enough rate to cover their risks for wind and hail and hurricanes. This wind pool is extremely underfunded and will result in billions of dollars of losses in the event of a large hurricane hitting our coast. The underfunded risk of loss used to be pushed on to the backs of the insurance companies on an unlimited basis. Insurance companies of course do not like unlimited liabilities so a few years ago the law was changed to allow wind pool shortfalls to be assessed to all homeowners policies across the state. This means if there is a large hurricane, then your homeowners policy, no matter where in NC you live, will be assessed with an annual assessment of up to 10% of the policy premium each year until the wind pool is made whole again. If we have more than one hurricane then you could see multiple assessment charges on your policy each year. This sneaky and horribly unfair approach will still not cover the shortfall that the wind pool might face and so insurance companies remain on the hook for a large share of this risk as well. This drives the insurance companies to want higher rates for all North Carolina homeowners policies but they have trouble getting around the rate bureau. They need a loophole for an end run around the rating process. Now I am hearing that some insurance companies are using the consent to rate form to do just this. They plan to have their customers sign a consent to rate form on every policy, then they can hold these consents in your file until they need to use it to dramatically increase your rates.. If you sign one of these forms on an open ended basis like this, then your insurance company has essentially hung the sword of Damocles over your head. You will be agreeing to a rate increase above the maximum rate, sometime in the future, to be used when the insurance company wants it or needs it. I have to believe that eventually the rate bureau will not tolerate this kind of rate meddling but until they do, you should do whatever you can to be sure that you don’t let them take advantage of you. DO NOT SIGN A CONSENT TO RATE FORM UNTIL YOU HAVE EXPLORED YOUR OPTIONS WITH AN INDEPENDENT AGENT!!

At Clinard Insurance Group, we are an independent insurance agency located in Winston Salem, NC. We represent dozens of different insurance companies and we can help you with your home and auto insurance, no matter where you live in NC. If you have received a consent to rate form and are not sure what to do, please call us, toll free, at 877-687-7557 or visit us on the web at www.ClinardInsurance.com.