Herbert M. Sheaner, Jr. 
Insurance Agency

 (Edited 8/14/2009)

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. The answers to these questions are different depending on whether the parents have a Texas homeowners policy or an ISO homeowners policy.

Texas Homeowners Policy
In order to be an "insured" on the Texas homeowners policy, one must be a relative of the named insured and reside in the named insured's household. This leaves a great deal of room for interpretation. It is generally accepted that students living away from home while attending college are residents of their parents' household. Based on previous Texas court decisions, 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. There may be borderline cases that require you to think about alternatives. For example, it may be difficult to consider a 23-year-old graduate student living in an apartment year-round to be a resident of the insured's household.

Property Exposures. The Texas homeowners policy covers personal property owned, worn or used by an insured anywhere in the world, subject to a maximum amount equal to 10 percent of the Coverage B Personal Property limit. (The 10 percent off-premises limitation on HO-C form only applies when the property is located at another residence owned by or rented to the insured.) When you evaluate whether this limit is adequate, consider the replacement value of the student's clothes, furniture, electronics and computers. In addition to the dollar limitation, personal property is not covered for loss by theft from the student's residence, except while the student is temporarily living there. This is a definite problem, especially when the apartment is owned, or rented for a 12-month term, and the student comes home for the summer. If either the dollar limitation or the theft exclusion is a problem, you should consider a separate tenant homeowners policy for the student.

Speaking of computers, HO-126 - Personal Computer Coverage - can be added by endorsement to cover the student's computers and peripheral equipment for a specific limit against "risks of direct physical loss," as an enhancement to the specified causes of loss provided in the basic homeowners policy. The limit applies either on-premises or off-premises without limitation.

Liability Exposures. The Texas 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. The best approach is to describe the location in the declarations and with a little extra premium charge.

Another liability problem arises if the student's residence is owned or rented by the named insured and other students pay rent to the insured to live there. An exclusion in the homeowners policy eliminates coverage for BI or PD arising out of the rental of the premises to more than two roomers. If there are more than two roomers, the only option is to provide a separate commercial general liability policy on the property.

ISO Homeowners Policy
In the ISO homeowners policy, the definition of insured includes special provision for students away from home. First, the definition includes the traditional wording (same as Texas) 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 previous Texas court decisions, 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. To eliminate some of the guesswork and interpretation issues involved in the first part, the definition goes on to specifically include "a student enrolled in school full time, as defined by the school, who was a resident of your household before moving out to attend school, provided the student is under the age of 24 and your relative." In addition, the ISO program includes an endorsement - HO 05 27 - Additional Insured - Student Living Away From the Residence Premises - to provide property and liability coverage for a student who exceeds the age restriction or who is not a full time student. The school and address of the student's residence are scheduled on the endorsement, so it is critical that the parents be informed to tell you if the student moves to another location.

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. (The 10 percent off-premises limitation only applies when the property is located at another residence owned by or rented to the insured.) When you evaluate whether this limit is adequate, consider the replacement value of the student's clothes, furniture, electronics and computers. If this limit is insufficient to cover the student's property, an endorsement - HO 04 50 - Personal Property At Other Residences - Increased Limits - can be used to increase the limit to the required amount. Like the Texas homeowners policy, there is a theft exclusion related to personal property situated at other residences except while an insured is temporarily residing there. However, the exclusion is specifically modified for property of students by covering the property even while the student is not living there as long as the student has been at the residence any time during the 60 days immediately before the loss. For 12-month rentals or owned property, when the student comes home for the summer, this modified exclusion may still be a problem that will require consideration of a separate tenant homeowners policy.

Speaking of computers, HO 04 72 - Personal Computer Coverage - Texas - can be added by endorsement to cover the student's computers and peripheral equipment with a specific limit against "risks of direct physical loss," as an enhancement to the specified causes of loss provided in the basic homeowners policy. The limit applies either on-premises or off-premises without limitation.

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 named insured for the student's use 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. Another liability problem arises if the student's residence is owned or rented by the named insured and other students pay rent to the insured to live there. An exclusion in the homeowners policy eliminates coverage for BI or PD arising out of the rental of the premises to more than two roomers. If there are more than two roomers, the only option is to provide a separate commercial general liability policy on the property.

Liability for Damage to Rented Property
The Texas and ISO homeowners policies exclude damage to property rented to an insured, with two exceptions. First, there is an exception to the liability exclusion that covers damage to rented property caused by fire, smoke or explosion. Second, the additional coverage for damage to property of others provides up to $500 on the Texas homeowners form or $1,000 on the ISO form for non-intentional damage to rented property without regard to negligence. Otherwise, there is no insurance method to overcome the rented property damage exclusion so you could find yourself "on the hook" for other negligent or intentional damage to the apartment unit rented by the student. Another aspect of apartment living is the possibility of negligently causing a fire that destroys parts of the apartment complex other than the unit rented to the occupant. High limits of liability - including an umbrella - should be considered to cover this exposure.

Owned Residences
Occasionally, a family will buy a house or condominium unit in the town where the student is going to college. In that case, a separate homeowners or condominium owners policy should be purchased. Eligibility rules and policy provisions allow up to two roomers. If the insured intends to rent rooms to more than two other students, you should provide coverage for a dwelling on a dwelling policy rather than a homeowners policy. For a condominium unit with more than two roomers, you can keep the condominium owners policy and attach HO 380 - Unit Owners Rental to Others - to the Texas condominium owners policy (HO 381 for Form C), or HO 17 33 - Unit-Owners Rental to Others - to the ISO condominium owners policy.

The Case for a Separate Tenant Homeowners Policy
After all of the above information is considered, it's easy to see plenty of potential coverage gaps in the standard homeowners forms when a student leaves home for college. When considering this issue, ask yourself the following questions. If the answers are not satisfactory, request a separate quote for tenant homeowners policy for the student's residence, whether it be an apartment or a dorm room.

1. Based on the age and independence of the student, is there any question that he or she would legally be considered a resident of the named insured's household?
2. Is the student's apartment rented in the parent's name?
3. Is the student's apartment rented only for the semester or school year, or is it rented for a 12-month term?
4. Will the insurance company underwriter agree in writing that the student's apartment is an insured location when it is rented by the named insured for the student's residence?
5. Does the student come home for summer vacation? Is summer vacation more than 60 days long?
6. Is the limit of insurance on property away from the residence premises (10 percent of the personal property limit on the policy) sufficient?
7. Does the student have a computer and related equipment?
8. Is the student enrolled as a full-time student as defined by the college? Will the student continue to be enrolled as a full-time student during their college career? Can you trust the parents to call you if the student falls below the full-time hours one semester?
9. Can you trust the parents to call you if the student moves to a different apartment sometime during their college career?
10. Will the insured or the student rent rooms in the student's apartment to other students? If so, how many?
11. Did you tell the parents and the student that damage to the rented apartment isn't covered, unless caused by fire, smoke or explosion?
12. Are the limits of liability sufficient to cover the maximum possible loss in case the student causes a fire that destroys the apartment building?