Got Kids in College? Better Get Insurance.
September 15, 2015
Used to be kids showed up to their college dorms with not much more than the clothes on their backs and a couple of suitcases. Maybe they brought a small stereo. A generation ago, laptops were nearly unheard of in college dorms. Obviously, those days are over. Today's college students rely on a small arsenal of laptops, tablets, smart phones and other valuable electronic devices - without which they would have a tough time functioning and completing their schooling. These days, access to a laptop computer isn't just a luxury for students - it's a must.
Homeowners vs. Renter's Insurance
Fortunately, if parents own a homeowner's insurance policy, most full-time students are covered against theft and other common hazards under that policy if their primary residence is still the parent's home. In most cases, these students are covered even if they are living far from home in a college dormitory.
There are exceptions and exclusions, of course. Insurers usually set an upper age limit of 24 on students they are willing to cover under a parental policy. Carriers will also typically insure 10 percent of the value of the parents' insured belongings and personal possessions and effects.
You may not want to rely entirely on your homeowner's insurance policy to protect your college age child, however. Homeowner's insurance deductibles tend to be $500 to $1,000 higher as well - too high to provide the student with meaningful protection against a stolen tablet or smartphone, for example. Furthermore, homeowner's insurance is not well suited to covering relatively small losses such as a typical dorm theft. Repeated small claims could cause your homeowner's insurance company to increase rates or can even cancel your policy if the number of claims is excessive in a short period of time. Most experts suggest preserving the homeowner's policy for bigger events: Say, the building burns down and your child loses everything he or she has.
A renter's policy may be more effective. These are extremely inexpensive in most cases - average costs are around $200 to $300 per year, for about $15,000 in personal possessions coverage, and have lower deductibles that are more appropriate for college students. Additional insurance is easily purchased if necessary.
If the parents still own the car the student is driving, then parents are still responsible for it, even when it's being driven by a full-time student. If the car is in a new location, on or near campus, rather than at the parents' residence, the car owners must notify the insurance carrier. Be sure to add your child to the list of authorized drivers. It's not a good idea to have other college students drive the car. However sending your kid to school without a car may be ideal. Talk to your college student about using ride sharing services or taxis when going out drinking. Indeed, the recent rise of ride sharing services like Uber and Lyft is making it easier and more economical to function without a car.
As always, speak with your college student about the risks of drinking and driving, texting while driving, driving while distracted, etc.
Umbrella Liability Insurance
You may wish to consider adding umbrella liability coverage to protect yourself and your college-age child. Umbrella coverage kicks in in case there is a claim against you that exceeds the coverage limits of your auto and homeowner's insurance policies. For example, imagine your college-age child causes a car accident that results in $500,000 in damages to another party. But your car insurance policy only covers $200,000 in liability. In that case, your umbrella insurance policy will cover the difference, up to the limits of the policy.
Under the Affordable Care Act, parents are generally entitled to keep full-time students on their own policies until the age of 26. Keeping the college age child on the parental health insurance plan, whether individually-owned or employer-sponsored, is usually preferable to enrolling the college student in the college health plan, because coverage is typically more limited with these plans. For example, many of these plans limit catastrophic coverage to $50,000 per accident or illness, and exclude injuries that are incurred as a result of alcohol or drug abuse.
If your health plan is a health maintenance organization (HMO) or preferred provider organization (PPO), take a look at the available network of care providers. These models of care rely on narrower networks of approved care providers to control costs. They may not have any approved in-network providers near the college campus at all.