Teach Risk While They’re Young

If you have a child in high school and, more importantly, entering college, there’s no better time than now to start teaching the fundamentals of managing risk.  You’ve been doing it for years with common statements like, “Stop, Look and Listen.”  But as they grow into young adults, there are new areas that deserve your lessons.  Following are some areas worth talking about before they become claims.

Discuss dangerous situations, especially surrounding automobiles.  If your child has a car, explain the implications of lending that car to another driver.  It’s enough of a risk for you to have your child behind the wheel of your car, not to mention the increased risk of an unknown entity.  Certainly, driving under the influence, texting while driving and any other means of distracted driving is worth a conversation, too.  There are dozens of statistics surrounding automobile accidents and fatalities. Unfortunately, most occur when one of the drivers was either under the influence or driving while distracted.

Stay close to your child through social media.  Remind him or her that anything posted to a social media platform is similar to writing on a wall in permanent marker with no way to paint over it.  Talk about instances whereby an individual has been harmed as a result of a social media mishap.  Additionally, if you are a “Friend” on Facebook, Twitter or any one of the other social media outlets, it’s likely that the communications will be well thought out prior to posting, knowing that you may see it.  There have been cases whereby a son or daughter of a high net worth family has been implicated through a bad social media exchange leading to losses.  Good coaching can avoid those problems.

Make sure that your child understands how to protect assets.  First things first, if away at school and the home address is the main address for your son or daughter, then your homeowner’s policy will generally cover losses, subject to your policy limits.  However, if he or she has rented an apartment, that’s not always the case.  Be sure to review your coverage to understand what is and what isn’t covered when they live away from home.  Renter’s policies can be very economical and useful, especially when a laptop or television set is stolen from your kid’s apartment.  Discuss how to protect belongings by staying organized, locking up financial information in a secure location and keeping valuables securely out of the sight of visitors.  When at school, sometimes a best friend can be the most desperate perpetrator of a robbery.  You can’t teach enough “Street Smarts” to your children.

Finally, make sure that your coverage adequately covers you for losses, notwithstanding the amount of time that you’ve spent preparing your child.  Umbrella liability coverage in an amount proportional to your net worth is very important. That’s because if there is an event that results in a lawsuit, the discovery process will undoubtedly uncover your net worth, which provides plaintiff’s attorneys a basis for establishing damages.  It also makes sense to have a separate policy for valuables when there is jewelry, artwork, collections or any other items of value that would create a significant loss if damaged or stolen.

I’ll conclude with a quick story.  A boy was at college and pledged a fraternity.  He was a successful student and ultimately became the president of the house.  During one popular social event that the fraternity sponsors on an annual basis, a freshman pledge decided to perform an act that only a cartoon character would attempt without injury.  Unfortunately, for everyone involved, the pledge was injured seriously and has lifelong implications.  A lawsuit followed by the parents of the injured individual.  A healthy claim was paid.  Guess where the money came from?  The president of the house father’s homeowner’s policy. The father has a significant net worth and typically, the lawsuit follows the money.  Oh, and by the way, the president of the fraternity is legally responsible for the actions of the house. 

Moral of the story, it pays to teach your children how to manage risk early.