Question about umbrella policy and adult children living at home

[SecondCor521]

Hi all.

I have three adult children. The oldest two are living at home while saving up for a house and while starting a business. The youngest is away at college but plans to be home this summer.

I have a typical FIRE net worth. My kids are typical just-out-of-college to junior-in-college young adults...they have money and good prospects, but they're just starting out.

All three of them own their own vehicles and pay all of their vehicle expenses. I'm not on the titles, I've never been on their loans, etc.

I have an umbrella policy with USAA. USAA is insisting that since my adult children live at home all the time or sometimes, that they require me to add my adult children to my policy. This would extend the umbrella policy coverage to them and increase my premium.

It also sounds like they are trying to get my kids to increase their auto liability coverage so there is no coverage gap between their liability coverage and my umbrella coverage.

They assert that the reason for this is as follows: Suppose a child of mine mows down a gaggle of schoolchildren who were destined to be doctors and attorneys but now have a bunch of medical bills. The parents of those kids sue my child. My child calls their insurance company. Then ... mumble mumble ... the children's parents sue me because ... mumble mumble ... somehow I'm liable because they live with me and we share DNA.

This seems like a ridiculous theory of negligence and liability. If a stranger mowed down that same gaggle of schoolchildren while staying at my house, I don't think I'd be liable. I don't see how sharing DNA matters.

Again, I don't drive their cars, I'm not listed on the title, I don't pay for their gas, or their insurance, or their auto repairs. I don't even tell them where to drive or how to drive.

Questions:

1. Can someone explain this liability theory to me? Please don't just say it's a thing so I have to do it...please explain why or how I'm liable.

2. Any way around it? I would love to live in a world where my kids' actions and finances are separate from mine. I think they understand the implications of their liability coverage limits and are fine not having my additional umbrella cover their actions. I don't want my umbrella coverage to cover them and I never expected it would.

Thanks.

 

[daylatedollarshort]

State Farm had the same rule. We had to add an adult kid to our liability policy who moved back home for awhile and had their own car, title in their name only and own insurance. I think it was an extra $600 or so a year at first.

I asked if we had a an unrelated person renting a room in our house if they would have to be on our umbrella policy and they said no. I talked to a different agent and they told me the same thing about having to add a family member. It makes no sense if you wouldn't have to add an unrelated renter, but they wouldn't budge on it and they were still cheaper for us than switching insurance companies.

 

[DrRoy]

I don't have experience with this but it does seem to me that it takes very little cause for people to sue over something.

 

[Dtail]

We have Travelers and it is the same concept, not to mention that even for the auto policy, the young adult is deemed to be driving all the cars.

 

[Badger]

I wonder if this would be the case if the person was a widow/widower and the grown children were their step-children.

Cheers!

 

[Dash man]

My father-in-law lives with us and USAA said we need to have him named on our policy. We didn’t have him change his State Farm auto policy and they didn’t ask.

 

[HenryD]

Before I (re)married I sold my house and moved into future-wife's. Teenage step-son-to-be was rated on her policy, but of course not on mine (different company). A few months later my company, without being given any more info than my change of address, inisists I add him. He never drove my car and we had no legal connection, but using the same address was enough.

 

[Jerry1]

My guess is that it costs a lot of money to prove you’re not responsible for your adult children’s actions. They are probably assuming that because you have the same DNA that you will be sued. Your logic may prevail, but there will be a cost so they want you to cover them on your plan. This makes some sense to me because rather than prove anything, the insurance company will probably settle for something in line with your policy so they may as well include everyone on the policy.

 

[street]

I don't have experience with this but it does seem to me that it takes very little cause for people to sue over something.

This ^. I would hate to find out the hard way. Since Company is aware of your situation and something went wrong, it could be a bad deal.

Again, I have no experience in this issue but just some commonsense what could happen response.

Good Luck and I hope you find the happy medium.

 

[MarieIG]

There are two different aspects at play here.

Your potential liability -

Your carrier's exposure under the law.

They may have exposure, which they do not want, if they are not getting their premium for coverage (which they may or may not) be mandated to extend under state law.

We see this to a certain extent in NY - when the kiddos reach driving age. The parents are supposed to add them to their policies, which hikes up the rates - and repeatedly fail to do so until they are "caught" by the carriers - and the letters go out. However, if kiddo gets into an accident (they, like other drivers of the parents' vehicles) would (barring very unusual circumstances) be covered under the policy in effect as of the date of loss, even had they not been added.

 

[FLSUnFIRE]

My guess is that it costs a lot of money to prove you’re not responsible for your adult children’s actions. They are probably assuming that because you have the same DNA that you will be sued. Your logic may prevail, but there will be a cost so they want you to cover them on your plan. This makes some sense to me because rather than prove anything, the insurance company will probably settle for something in line with your policy so they may as well include everyone on the policy.

I think part of it is, assuming complete integrity wrt use of vehicles (surely a lot of folks will stretch the truth to save a buck), is that in a roommate/non-relative situation, if they were to steal your car and injure/kill someone you would likely be fully cooperative with the criminal prosecution which would also figure into the potential liability. Blood, you probably don't want to see those felonies stacked up and ruin your child's life (now they killed/injured someone in commission of a felony of grandtheft auto etc) and you are much less likely to cooperate and expose the insurer to greater risk.

 

[Aerides]

It's pretty simple - since the umbrella covers events not just in your home, but things you do out in the world, the liability, and the coverage they are obligated to provide in the event of a claim, extends to everyone who lives in the home.

Even if none of them had cars the same would apply. But an umbrella is supplemental, so most are going to require minimum levels of auto and home owners insurance before an umbrella would kick in.

My policy defines "insured" as me/DH and "any relatives whose primary residence is my household.

Oh and that kid starting a business? They might need business insurance as well.

 

[RetiredAt55.5]

State Farm had the same rule. We had to add an adult kid to our liability policy who moved back home for awhile and had their own car, title in their name only and own insurance. I think it was an extra $600 or so a year at first.

We have all our insurance through State Farm too. Our umbrella went down about $300 when our last son moved out (more than half the total cost).

It's looking like one of our adult sons will be moving back home for some undetermined amount of time due to job/career burn out. So, the umbrella will go back up.

I'm going to have a discussion with my agent on whether he can go back onto our auto policy. In theory, it might be cheaper than continuing with his own policy, but I dunno, it might require adding my name to the title (which is an additional cost). Since it's an out of state move, he's going to have to get a new car registration in either case. Sigh, why doesn't anything get easier in our "golden" years?

 

[Mark1]

I can see some justification for the increased premium. For example, with the sons living on the property, there is likely more foot traffic and visitors to the property and thus more risk of an accident occurring.

Not having kids, this issue never happened to me. However, when I got a 3rd vehicle in our household, I did wonder why the liability coverage didn't change on my first two vehicles, but yet I had a third liability premium to pay on the additional vehicle. Last I knew, DW and I can only drive two vehicles at any given time.

 

[daylatedollarshort]

I forgot to add when our adult child moved back home they were not a dependent on our taxes, working full-time, paid a nominal rent and were over 21. So I don't see how legally if they got in an accident we would be sued any more than if we had helped out and rented a room to one of their friends instead of our own kid.

 

[ncbill]

My insurer charges me extra on umbrella for my recent graduate since they're under 25.

Away temporarily for their military job training but their residence is still my home.

Even though the insurer cannot charge me extra under my auto policy as my state only allows an "inexperienced driver" penalty for three years.

Regardless of whether they started driving at age 16, age 18...or age 40.

 

[badatmath]

Pretty standard IMO. I doubt you could get around it.

 

[ivinsfan]

I'm somewhat familiar with this as we farm in a C corp with a B and SIL.


We use a company that understand how a farm operates. We have one insurance policy that covers everything and everyone and an umbrella. Yes when kids were at home or at college we had to list each and every kid on the policy. We had to carry more then the state minimums on car coverage.


With 2 actually living at home it's fair they want to include them. How are you liable? Let's see your kid has a few friends over and one friend drinks one too many beers. leaves your home kills someone or themselves while over the limit. You don't think you are going to get sued, oh yes you are, count on it.



A kid needs to run to the store and their car is acting up so they hop on your car and while texting run a light and bingo. So who covers that suit your kids car insurance, or your car insurance and your umbrella?



I noticed you said you don't drive their cars..never say never and that's when Murphys law kicks in. I know it annoying believe me with insurance they always want to CTA for the one in a million problem. An umbrella written by a reputable company is an all or nothing proposition. IME anyway.



You could always drop your umbrella if you see fit.

 

[Sunset]

Blood is thicker than water.

Insurer's know people will lie for family.

I would guess you are not charging the kids rent, but you would charge a stranger rent to live there.
So charge them a fee to pay for the increased cost of the insurance.
If you don't want to charge the kids a fee, it proves blood is thicker than water, and they are not treated like strangers.

 

[street]

I'm somewhat familiar with this as we farm in a C corp with a B and SIL.


We use a company that understand how a farm operates. We have one insurance policy that covers everything and everyone and an umbrella. Yes when kids were at home or at college we had to list each and every kid on the policy. We had to carry more then the state minimums on car coverage.


With 2 actually living at home it's fair they want to include them. How are you liable? Let's see your kid has a few friends over and one friend drinks one too many beers. leaves your home kills someone or themselves while over the limit. You don't think you are going to get sued, oh yes you are, count on it.



A kid needs to run to the store and their car is acting up so they hop on your car and while texting run a light and bingo. So who covers that suit your kids car insurance, or your car insurance and your umbrella?



I noticed you said you don't drive their cars..never say never and that's when Murphys law kicks in. I know it annoying believe me with insurance they always want to CTA for the one in a million problem. An umbrella written by a reputable company is an all or nothing proposition. IME anyway.



You could always drop your umbrella if you see fit.

Those are great examples why paying more, because there is more exposure.

 

[SecondCor521]

Thanks everyone for the replies so far.

My guess is that it costs a lot of money to prove you’re not responsible for your adult children’s actions. They are probably assuming that because you have the same DNA that you will be sued. Your logic may prevail, but there will be a cost so they want you to cover them on your plan. This makes some sense to me because rather than prove anything, the insurance company will probably settle for something in line with your policy so they may as well include everyone on the policy.

Sure, I understand that.

I guess my POV would be that if my adult child caused damages in excess of their liability limits and my DNA and address is enough to get me named as a defendant, then I can hire a lawyer myself to get myself removed from the suit and pay out of pocket.

Just because I have an insurance policy with USAA doesn't mean I have to use it. It's not like they're going to butt into my legal affairs. I'd be fine if USAA just declined my claim in this circumstance.

Unless somehow the parent of the injured child could sue USAA as well. That seems a stretch, but maybe it happens.

 

[SecondCor521]

There are two different aspects at play here.

Your potential liability -

Your carrier's exposure under the law.

They may have exposure, which they do not want, if they are not getting their premium for coverage (which they may or may not) be mandated to extend under state law.

We see this to a certain extent in NY - when the kiddos reach driving age. The parents are supposed to add them to their policies, which hikes up the rates - and repeatedly fail to do so until they are "caught" by the carriers - and the letters go out. However, if kiddo gets into an accident (they, like other drivers of the parents' vehicles) would (barring very unusual circumstances) be covered under the policy in effect as of the date of loss, even had they not been added.

This sounds like the flavor of what is going on. They keep telling me they have to have them added because of their contract. My reply is "change the contract so you don't extend coverage and I don't pay a premium". I might want $1M in coverage but my kid with a $10K net worth only wants $100K. If my kid wanted $1M in coverage, then sell him an umbrella policy.

 

[SecondCor521]

I think part of it is, assuming complete integrity wrt use of vehicles (surely a lot of folks will stretch the truth to save a buck), is that in a roommate/non-relative situation, if they were to steal your car and injure/kill someone you would likely be fully cooperative with the criminal prosecution which would also figure into the potential liability. Blood, you probably don't want to see those felonies stacked up and ruin your child's life (now they killed/injured someone in commission of a felony of grandtheft auto etc) and you are much less likely to cooperate and expose the insurer to greater risk.

I don't drive their cars, they don't drive mine. I suppose there is the case where they might be moving my car out of my driveway or something as an occasional thing. I suppose they could run over a kid in my driveway and it would be confusing as to how the contracts are worded whether my umbrella should cover it or not. I know on my auto policy that occasional family use is OK and they are covered driving my car on the auto policy.

There would be no grand theft auto. If they use my car or I use theirs, it is always with prior knowledge and consent.

 

[SecondCor521]

It's pretty simple - since the umbrella covers events not just in your home, but things you do out in the world, the liability, and the coverage they are obligated to provide in the event of a claim, extends to everyone who lives in the home.

Understood. I would rather it just cover me and my actions, though. That's what I thought I was paying my premium for. I don't want to cover my kids' actions, even though they live at my address.

If I rented out a bedroom to an AirBnB guest and they caused an accident, I would assume no liability and wouldn't expect to get sued and wouldn't want my umbrella policy to cover them or their activities.

Oh and that kid starting a business? They might need business insurance as well.

Sigh. I'm talking at him about it, but he's not ready to listen yet.

 

[SecondCor521]

I forgot to add when our adult child moved back home they were not a dependent on our taxes, working full-time, paid a nominal rent and were over 21. So I don't see how legally if they got in an accident we would be sued any more than if we had helped out and rented a room to one of their friends instead of our own kid.

Right. I'm wondering if it would be better for me to just charge my kids rent when they live here and somehow get out of it that way.