Insurance for Boomerang Kids

My son has been having trouble finding a job and is about to move back into our house for a while. What do we need to do about his insurance?

With a tough job market, many parents are welcoming back grown kids who they thought had left the nest for good. Here’s how to make sure they have the right auto, home and health-insurance coverage when they move back in with you.

Auto insurance. If your son just graduated from college and doesn’t have his own car, then your auto-insurance coverage may change very little. If you had been getting a discount because your child was living more than 100 miles away while at college, just let your insurer know that he has moved back home. The discount will disappear, but your son won’t need to get a new policy, and he’ll have coverage when he drives any of the family cars.

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If you excluded your son from your policy while he was away from home to save money on your premiums, you’ll need to call your agent or insurer to get him reinstated. The price will jump back up, but you’ll eventually get a bit of a price break when he turns 24 or 25 and is considered an adult by most insurers.

If he has his own car, then he probably has his own policy. It’s a good idea for him to keep the policy, says Mike McCartin, an independent insurance agent in College Park, Md. If you and your son have coverage with the same insurance company, you may qualify for a multi-car discount -- which could lower your rates by as much as 20% to 30% -- even if you have separate policies, McCartin says.

Home insurance. Your homeowners insurance policy will cover your son’s stuff while he’s in your house. But if he has any valuable items -- such as an expensive computer system or other fancy electronic equipment -- make sure your policy provides enough coverage. At State Farm, for example, the personal-property coverage is based on 75% of the replacement value of your home. So if your home is insured for $200,000 to rebuild, for example, you’ll automatically have $150,000 in personal-property coverage. Contact your agent or insurer if you need to boost your overall coverage limits or buy extra coverage for specific items. Most insurers limit coverage on certain types of valuables, such as jewelry, to just a few thousand dollars, but you can usually add extra coverage for about $10 per $1,000 in coverage for jewelry or $1.50 per $1,000 for other valuables.

Health insurance. The health-care-reform law requires insurers to let adult children up to age 26 stay on their parents’ policies, which can be a big help for kids who have a tough time finding a job with benefits. In most cases, this extra coverage won’t take effect until January 1. But some insurers are letting recent grads stay on their parents’ policies before the law officially kicks in (see New Grads and Health-Care Reform for details).

If you have health insurance through your employer, you should be given the option during open-enrollment season this fall to sign up children younger than 26 for coverage under your policy in 2011. See Keeping Adult Children Insured for more information.

If an adult child has a job with benefits but loses that job after open-enrollment season, then he can be added to his parents' policy -- even if he’s eligible to keep the coverage from his previous job through COBRA, says Pearce Weaver Jr., senior vice-president of Fidelity Consulting, which helps companies navigate their employee-benefit options.

You may not have to pay extra to add your son to your policy if you already have a family policy to cover younger siblings. If you do have to pay extra, however, compare the additional cost to the price of buying his own policy. Most healthy people in their twenties can find individual health insurance for less than $100 per month. You can lower the premiums by raising the deductible, yet still have coverage for major expenses. See Score Big Savings on Health Coverage for more information.

Either way, you may need to find other coverage until you can add him to your policy on January 1 -- and you’ll need to find alternatives if he’s older than 26. His options depend on his health and his current coverage. If he’s healthy, he could buy a low-cost individual policy and then decide whether to keep it past January 1 or switch to coverage under your plan. If he has health issues and has COBRA coverage from a previous job, he could keep that coverage for up to 18 months (although the price may be quite steep). If he’s been uninsured for at least six months, he can sign up for coverage under the new high-risk pool. See FAQs on the New High-Risk Pool for details and www.healthcare.gov for more options.