We love our teen and young adult children dearly. But financially speaking, they can be more of a liability than an asset. We know that part of their growth is to learn that their actions have consequences. Sometimes, those consequences can create substantial risks to the whole family.
We asked property/casualty insurance expert Sarah Paulson for tips on reducing legal risk from teens and young adults. Here are her suggestions along with some “Do’s” and “Don’ts”:
Motor vehicle accidents are a big problem among teens and young adults. In 2016, young people ages 15-19 accounted for over $13 billion in total costs of motor vehicle injuries, according to the CDC. In California and most states, parents must consent to allow their minor child to drive, and in doing so, they assume parental liability for any accidents caused by the minor. This means parents can be liable for damages resulting from a child’s negligent acts while driving.
To protect against liability from your teen getting in an accident, parents should be either registered or co-registered on the vehicle that the teen is driving. The car and the teen should be listed on your insurance policy and should be added to your umbrella liability policy as well. Young drivers significantly increase your liability exposure, so it’s important that your total liability coverage is on par with your net worth and income.
Do: Choose your teen driver’s car wisely. “Comprehensive and collision coverage for a teen’s car is very expensive,” says Sarah Paulson. “Choose a car that doesn’t need full coverage anymore because it’s older and the value of the car is lower. This can significantly reduce premium costs.”
Don’t: Keep them hanging on. Once a young adult is no longer a member of the household, is financially independent and the parents are no longer registered on the vehicle, they should go on their own insurance policy.
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This risk is all about the alcohol (or any other intoxicating substance, for that matter!) In California, social hosts who provide alcohol to their guests are generally not held legally responsible for damages suffered by that person, or for any injury to any third person caused by the consumption of alcohol. However, there are some big exceptions to this when minors are involved.
For one thing, if a social host sells alcohol (think Keg party with a “cover charge”) to an “obviously intoxicated” driver, they may be held liable for injuries or death caused by the intoxicated driver. And if an adult knowingly provides alcohol to a someone under age 21, she may be found liable for the negligent driving of the minor caused by the alcohol being provided.
Do: Manage the hosted party. Serve non-alcoholic drinks, and if alcohol is present, put a Safe Rider Program in place.
Don’t: Allow your teen to invite a bunch of kids you don’t know to an event at your home.
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Social Media and Bullying
Negative statements made on social media sites like Snapchat, Twitter, or even on group texts become public and may be very hard to erase. “Cyber bullying” is a growing issue among teens, and if yours was accused of cyberbullying, it could be considered “libel, slander, or defamation of character” and could open the door to a lawsuit.
The potential damage from online statements is real. As many college admissions offices and employers look up applicants on social networking sites, negative information posted online, even if it’s just rumors or gossip, could damage a person’s ability to get into the college of their choice or to land a job. That person (or their family if it’s a minor) could claim this damage constitutes “personal injury.” Many homeowners or renter’s policies will not cover a “personal injury” lawsuit claiming that negative information online have damaged a person’s reputation.
Do: Add Personal Injury Coverage to your insurance. If your homeowners or renter’s policy and your umbrella liability policies do not include protection for “personal injury”, add this coverage. “It often is not expensive to add this, noted Sarah. “But it’s so important with the growing social media presence.”
Don’t: Allow your teens to post negative or bullying comments online. Educate them about the dangers of cyber-bullying.
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Pranks, fights, and vandalism
What do all these have in common? They are “Willful misconduct” that may cause injury or property damage. In California, parents can be held liable for any willful misconduct causing injury, death or property damage by a minor under the age of 18.
Do: Educate teens about the financial cost pranks, fights, and tagging can cause for the family.
Don’t: Have insufficient liability coverage. Determine the right amount of liability coverage for your level of assets and income, and then make sure you have enough liability insurance to provide that coverage.
Protecting from the biggest risks is important to financial security, and so if you have teens or young adults under your roof, protecting yourself from these risks should be part of your financial plan. At Blankinship & Foster, we help you build an integrated financial plan that considers all areas of your finances.
Please contact us to learn more about how our wealth management service helps you “Get to How.”