More and more people are living together without getting married. Most people don't realize it, but this affects who is covered by any home or auto insurance policy. Here's what you need to be attentive to, according to the independent insurance agent experts.
Home Insurance Policy Limitations to the "Named Insured"
Most standard home insurance policies restrict coverage to a “named insured”—the individual(s) named on the policy and their resident spouse. The same standard policies often extend coverage to “resident relatives,” including:
- Individuals related to the named insured by blood
- Individuals related to the named insured by marriage
- Individuals related to the named insured by adoption
- Someone under 21 years old in your care, such as a foster child
However, that applies if any of these people are residents of the named insured’s household. This means that a home insurance company has no obligation to cover a non-insured’s liability or to defend that person in a lawsuit alleging liability.
A Scenario Illustrating Homeowners Insurance Limitations
Consider this scenario: A woman and her teenage son move in with the woman’s boyfriend. The son seriously injures another child in a tackle football game at the park down the street. That child’s parents file a suit against the mother/girlfriend.
What happens next?
Unless the mother/girlfriend has her own separate insurance policy (such as a renters insurance policy) or has been added as a named insured on the home insurance policy (which most insurance companies won’t do if she isn’t a relative), she has no coverage just because she lives with her boyfriend.
Personal Property Limitations
The problem doesn’t stop with liability.
Chances are the mother/girlfriend and her son will move some of their personal property in with them. However, clothes, electronics, school supplies and whatever else belongs to them may not be covered by the homeowner’s insurance policy, either.
Most policies exclude coverage for personal property that is owned by roommates, boarders or tenants. This personal property exclusion is another reason why a renters insurance policy is essential for non-insured roommates.
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Auto Insurance Policy Limitations to the "Named Insured"
Auto policies also have a “named insured.” This means the insurance covers the person named on the policy and their spouse. Keep in mind that an auto policy varies depending on the coverage. For example, liability, medical payments, and uninsured motorist coverage each have their own definitions of “insured.”
A Scenario Illustrating Auto Insurance Limitations
Consider this scenario: An adult boyfriend and girlfriend each have a car and their own personal auto insurance policies:
- The girlfriend's policy has a high liability limit of $100,000
- The boyfriend's policy has a lower limit of $25,000
The liability provisions of a policy cover the “named insured” and “family members” for liability arising out of the use of any auto. They also considers any other person an “insured” while that person is using a car - with permission - that is insured under the policy.
Dig deeper and you’ll see that the policy excludes coverage while the “named insured” or “family member” is operating a vehicle that is furnished or available for regular use.
If the girlfriend is driving the boyfriend’s car and gets into an accident causing injuries, his auto insurer would pay up to the policy limits—in this case, $25,000. Unfortunately this may not be enough to cover the full liability if the injuries are severe.
The liability policy with the $100,000 limit might not be available as a fallback, even though it covers the driver for the use of any auto. That’s because the driver’s insurer can argue that this car is available for the driver’s regular use, since the car owner and driver live together.
Under those circumstances, coverage is excluded by the policy language.
The Bottom Line
Insurance is already confusing, and gets more confusing if you live with someone but aren't married. The good news is that these scenarios have solutions that your insurance agent is ready to discuss with you. Take the guesswork out and let your agent do the work for you, instead!