(Chorus)

Oh, I'm down and I'm draggin',
I've got them homeowner policy blues!
The insurance man may say it's no big thing
But I'm feelin' lower than my shoes!

Seems they've got this language
'Bout students away at school.
Gotta be takin' full hours
And under 24 years old, too.
Makes me a two-time loser
Cause I ain't neither of those.
So under my 'rents homeowners, all my coverage just got hosed!

(Repeat chorus)

Yes indeed, thousands of college students are now first-rate candidates for those homeowner policy blues. Having just turned 24, little did they know they were quietly being ejected as an insured from their parents' homeowners' policy. The real question is, how many parents (and their insurance agents) didn't notice either?

There are a plethora of coverage issues in the homeowner program, and with the new ISO 2011 forms arriving, changes, expansions, restrictions and “no change, just clarification of intent” provisions will be endlessly discussed in many authoritative articles and seminars. But one potential coverage gap has not changed with the new forms. Originally introduced with the ISO HO-2000 program, for many parents it hits close to home—it involves kids. Back then I wrote an article including the original version of that blues song, commenting on how my own college-going son had just turned 24 and was directly impacted by this provision.

Yet even as my eldest offspring move into their 30s, I am aware that from my perspective, age has absolutely zero impact on whether I still think of them as my “kids.” I now understand how my mom could look at me and say “Do you remember your pajamas with the feet? They had that elephant on the front and you were so cute!” To which my protesting reply, often delivered with a level of increasing embarrassment equal to the current number of adults within hearing range, was “Mom! Come on. That was over 40 years ago!” I have personally refrained numerous times from looking at my eldest and remarking aloud about how I can still see him crawling around the floor, sucking on that big pacifier.

So when a coverage issue applies to our clients' kids, and focuses on age as if that somehow is a key issue, it leaves the world of interesting semantics and enters the realm of potentially painful reality. That is particularly true in this current economy, when “kids” of all ages remain in—or have been forced to return to—a state of financial and emotional dependence upon their parents.

Allow me to point out the specific part of the ISO standard homeowner form that threatens to turn theory into harsh reality. In the definition of “insured,” you will find the following wording:

“Insured” means:

a. You and residents of your household who are:
    1. Your relatives; or
    2. Other persons under the age of 21 and in your care or the care of a resident of your household who is your relative

b. 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:
    1. 24 and your relative; or
    2. 21 and in your care or the care of a resident of your household who is your relative.

Note the wording about students away at school and you see the basis for singing the “blues.”

ISO clearly believes that students away at school full-time are no longer “residents of your household” and thus to continue coverage under the parent's policy must meet special requirements. Keep in mind that who and who is not a “resident” often ends up in the realm of court decisions, with arguments over the departing person's intent to establish a residence elsewhere and the permanency of the arrangement. But setting aside all that and assuming ISO is correct in its belief, it's never a bad idea for a student who has his or her own apartment to get an HO-4—if he or she can find a carrier to write it.

That said, I really don't like this provision. I think the exclusive focus on students is the problem. Perhaps ISO picked up that idea from health insurance, which prior to the latest national health care changes cut off dependent coverage at a given age, unless a person was disabled or a full-time student. But while the dependency issue may or may not have made sense for health insurance, what has it to do with the homeowners property and liability exposure?

Dependency is not the key issue here, but apparently location is. Note the focus on the terms “residents” and “relatives” in the definition of an insured. The closest to “dependent” the policy approaches is the “in your care” language. That only applies to non-relatives. A relative of any age is covered as long as he or she lives at the residence. But if the relative moves away, we must determine whether he or she is a full-time student. Why is that? And if being a student is the issue, what difference does it make whether the student is 22 or 28?

This provision in the definition of an insured is loaded with arbitrary assumptions and coverage minefields. For example, if student status is somehow significant, why bring in the wrinkle of “full time, as defined by the school”? Why let the possibility that different schools may define that status in different ways enter into a consideration of insurability?

Related: Read  the article “Keep It Simple” by Chris Amrhein.

And how is the exposure different if the student goes to class part-time while also working full- or part-time? Whether at class or work, he's still away from his apartment. Isn't a student who works likely to be more responsible and less of a party animal than a full-time student? Wouldn't his or her liability and property exposure likely be less than if he and his parents had the financial resources to support his being a full-time student?

What if he begins the semester as a full-timer but 3 weeks later finds he can't handle both chemistry and the physics lab and so drops one? Because he is no longer “full-time,” did his coverage under the standard form just cease—immediately?

ISO has an endorsement (HO 05 27 05 11, Additional Insured – Student Living Away From The Residence Premises) that has the stated purpose of restoring insured status to someone from whom the new wording takes it away. In reality, it further complicates this matter. Here's the kicker. The HO 05 27 requires the name and address of the student and the name of the school be specified in the endorsement schedule. Then the endorsement states:

The coverage provided to the person named in the Schedule only applies while that person is enrolled at the school and is residing at the address that is shown in the Schedule.

Talk about your coverage minefield!

Related: Read Amrhein's article ” A Revolutionary Idea.”

Many students move from dorm to apartment, or from one apartment in the fall and spring to another in the summer. Each time such a student moves, the policy will have to be endorsed. And what if the student decides to take a term off to work full-time to help cover those college bills? As long as he heads straight home to live with Mom and Dad, all is apparently well. But what if he takes a job in the college town and stays at that apartment? No longer enrolled means no longer covered. But once the student re-enrolls as a full-timer he has coverage. Oh, as long as the student is at the declared institution. Don't get me started on what happens if a student drops out of a four-year school and enrolls part-time at a community college.

Every year, the number and age of students pursuing higher levels of education increases. So be mindful of these student provisions and how they may apply to your insureds. If you fail to discuss the forms provisions and the endorsement with insured parents of the affected kids, at claims time those blues just might become a duet.

In the words of the immortal Johnny Cash, “I hear that train a-comin.'”