Insurance considerations for baby boomers in ‘accordion families’

Along with America's economic troubles has come a new phenomenon: the accordion family. The term was branded by Katherine Newman in her book "The Accordion Family: Boomerang Kids, Anxious Parents, and the Private Toll of Global Competition," and she characterizes it as a multi-generational household with some working members and some non-working members. They typically consist of parents and their adult children who move back in during their prolonged job search.

With a sizeable portion of baby boomers' children graduating college and having varying levels of success at gaining employment, many boomers are seeing their adult children move back home as a practical financial consideration.

Adjusting to the new reality may be easier for some boomers than others.

Insurance implications for 'accordion families'
"With so much time being spent by boomers getting used to the new living arrangements and trying to find ways for their children to get back on their feet, they might be overlooking some serious insurance implications," says Cesar Diaz, CEO of OnlineAutoInsurance.com.

When consumers run auto insurance quote comparisons with major insurers, those insurers are not only looking at the driving information for the car owners who are buying the policy; they're also looking at the driving information for all other members living in their household.

"This is because insurance providers understand that all members of a household likely have relatively easy access to the family cars," says Diaz, "and they need to price their policies with that in mind."

Baby boomers tend to have some of the lowest insurance prices available, since their accident risk is relatively low compared with other age groups. So a policy for a car being driven only by a 60-year-old and a 55-year-old is likely to have pretty low premium. But add a 20-something to the policy, and rates are likely to jump.

Get details sorted out with your agent
Children are usually covered under their parents' auto insurance policy, but each contract differs, and the safest thing to do is to sort out with your agent whether your adult children will be covered if they cause an accident while driving any family cars.

If your kids do move back home but aren't listed on the policy, it's possible that your insurer could deny any claims because of the fact that they weren't listed. If your kids only stay at your house temporarily, your insurer might provide coverage to them, but not at the levels afforded to the policyholder him or herself.

A California appeals court decision handed down earlier this year showed just how complex these situations can be.

The issue in the case was whether a policyholder's daughter, who was bouncing back and forth between three different residences, technically resided with her father and mother at the time of the accident. If she did, their insurer would have to provide more than $500,000 worth of coverage in the accident. If she didn't, the insurer would only have to provide $35,000 worth of coverage. In the end, the court ruled in favor of the policyholders, and full coverage was provided, but clearing up the issue with their agent beforehand likely would have canceled any need for a prolonged legal battle.

Even when your policy appears to provide coverage to your children who have just moved back home, there may be other parts of the policy that negate that protection. Either way, the bottom line is that you should check with your agent to sort out any coverage matters if your living situation has changed.