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Know the Gaps

Children and Liability Coverage Gaps: Why Parents May Need Added Coverage

Like most parents, you probably have your fair share of financial worries. Paying for daily needs, stashing money away for their college education, all while saving for your own retirement…it can take a lot of planning to do it right.

With so much on your plate as a parent, your insurance probably doesn’t cross your mind too often. But having insurance coverage in place that fits your needs as a parent is especially important. That’s because everyday activities like carpooling, chaperoning sleepovers, or hosting a house party can mean increased responsibility – and increased risk. So, no matter how young or old your kids are, neglecting to review your insurance coverage options could prove to be a costly mistake.

But why?  Well, let’s be honest: kids are accident prone. From the newborn who knocks a glass of juice on the carpet, to the teen that backs into a parked car, kids make mistakes. And, as their parent you have to deal with the financial or legal repercussions. That’s why it’s important to fully understand your insurance policy and make sure you have the coverage you want as a parent. Consider these scenarios that, as a parent, may lead to gaps in your coverage:

Scenario #1: You host a birthday party for your child at home and a guest gets injured

Many parents may not realize it but when you host other people’s children in your home, you open the door to potential exposure and risks. Let’s say you throw a birthday pool party for your 8-year-old daughter. Her friend slips and falls near the pool and gets hurt. The injured child’s parents file a lawsuit against you. Do you have enough liability coverage in place to address this liability claim?

Keep in mind that liability coverage can help provide you with legal defense fees, and in the event of a settlement or judgment, can pay damages up to your coverage limit. (Typical homeowners insurance policies contain $100,000 to $300,000 in liability coverage.*) But, what if the judgment is against you, and you have to pay damages far beyond that limit?

That’s a costly coverage gap, which an umbrella policy can help fill. Umbrella insurance is extra liability insurance. It is designed to help you with major claims and lawsuits, and usually kicks when the liability coverage on your underlying policy has been exhausted.

Scenario #2: Your teen driver is involved in a car crash

It happened all too soon. Your son reached his legal driving age, and it’s time to hand over the car keys. Unfortunately, this exciting milestone in your teen’s life is giving you sleepless nights.  So, are you simply being a paranoid parent? Absolutely not!  Statistics show that teen drivers are three times more likely to get into a car accident than any other age group.*

Imagine if your teen were at fault in an accident, and someone was injured. What if the victim sues you for medical bills, lost wages, and other damages? There’s a possibility that as a parent you may be held liable for your child’s actions. Now, what happens if your auto insurance liability coverage limit isn’t enough to pay the damages? Your assets could be at risk!

That’s why, if there’s a teen driver in your household, it’s probably wise to consider creating a financial safety net and, if you feel necessary, to fill any potential gaps in your auto liability coverage with higher limits, or by adding an umbrella policy.

Scenario #3: Your college kid lends their car to a friend who gets into an accident

Your kids may have flown the coop, but that doesn’t mean liability has flown out of the window too. Remember that if something unfortunate happens when kids are away at college, parents may still be on the hook for damages.  Let’s suppose your college student lives on campus and takes one of your drives with her. Now, what if a friend borrows her car and gets into an accident that seriously injures someone. You may find yourself facing a costly lawsuit! Like it or not, the car owner will be held responsible if the driver is at fault.  In such a situation, an umbrella policy can help pay any judgment or settlement, above your existing auto insurance liability coverage limits, and help to limit your personal assets at risk.

Parenting isn’t easy these days, which is why it’s smart to prepare for the unexpected. Whether you’re hosting kids at home, driving them to soccer practice, or watching your teen driver drive off with the family car, make safety your first and foremost priority. To assess your financial exposure, review your auto and home policies to understand the extent of your liability limits, and take the time to speak with a Farmers agent. A Farmers agent can help you spot gaps in your insurance and help you develop a plan so you can protect your personal assets the way you want.  

Written by Craig Davis

Craig Davis is an agent for Farmers Insurance and the owner of Craig Davis Family Insurance located at 27645 Jefferson, Suite 113, in Temecula. He may be reached at (951) 699-1776.

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