Insurance Considerations for the College-bound
As summer comes to an end and fall approaches, students around the country are about to head off on the next step in their journey to independence: college. With my youngest leaving for school out of state it seems like a good time to share my experience with the process from an insurance point of view. The Chartwellians and I have complied a list of important issues to consider beyond course selection, checking accounts, and compatible roommates.
Insuring Students’ Possessions
The packing list that the residential life folks at the college send might seem excessive, but fortunately a parents’ homeowners policy will typically extend to the possessions of their children while in a college dormitory. One caveat is that the deductible on the parents’ insurance policy may be greater than the value of their student’s “stuff”. If it doesn’t, either the deductible is too low or the student has too much “stuff” – it might be hard to convince nervous freshmen that they won’t need to pack everything they own, but once they settle into the dorm and see how small the closets are, they’ll probably thank you.
Notwithstanding parental pressure to minimize their student’s possessions, if the value of the “stuff” does exceed the deductible, parents should still be discouraged from filing a claim on their policy for items that are lost or stolen from the dormitories, especially if the items in question are electronics like phones or laptops, which are replaced routinely with upgrades anyway. Some homeowners policies also offer an endorsement for contents at a dorm, subject to a lower deductible, as well as liability at the college residence. Any claims will adhere to the policy, and could compromise future renewals and may result in a premium surcharge the following year.
Given these issues, we often recommend the purchase of College Student Renters Insurance as an alternative to an extension from the parents’ homeowners policy. This is a low-cost policy that protects most possessions, and covers against the perils of flood, earthquake, theft, burglary, and fire. There is also $5,000 identity theft expense included with no deductible applied. Remember though: for many students, the biggest risk involving lost property is the loss of the electronic data rather than the device itself. Encouraging students to automate backups for phones, laptops, and other devices with meaningful data can make the difference between recreating a capstone project and all the notes from scratch and putting the finishing touches on a paper at the eleventh hour.
Off-Campus Housing and Extending Liability
Off-campus housing provides a lot of independence for students but can create challenging situations when it comes to insurance. Parents are often required to co-sign leases for off-campus housing, and have two options for covering themselves and their children’s interests in these housing situations.
The first option is to extend liability from the parents’ homeowners policy and to add the location to the umbrella policy as well to ensure there is liability coverage in place. Advise students of the perils of serving alcohol and of illegal substances used or sold at parties, especially if minors will be present. If anyone is seriously hurt or injured on the property, the parents of the student hosts will likely be included in a plaintiff’s lawsuit. This article published in the Atlantic summarizes the extent of party-related accidents and the litigation which ensued. Although attempts at curbing this kind of exposure have been made on many campuses since 2014 when the article was written, the takeaways remain unfortunately very relevant. Off-campus housing only loosely or not at all connected to the school can be even more relaxed when it comes to regulations – make sure to check thoroughly the contracts of any housing applications your student signs, especially if they are still under 21.
The second option is to obtain ‘regular’ renters insurance. A good renters policy will provide a primary layer of defense costs, coverage for possessions, and additional living expenses if there is a fire, a leak, or a burst pipe which makes the apartment uninhabitable. Each roommate should purchase their own policy to ensure they each have adequate liability and are not forced to share the contents coverage limit. Roommates not named on a policy may not be entitled to any coverage or additional living expense. When placing coverage independently of a known agent or broker, parents and students should check for exclusions relating to alcohol or substance usage, even the use is legal. If a parent is on the lease as a co-signer, this location will still need to be added to their homeowners and umbrella policies, but provides an extra buffer of contents and liability protection for the student and parents.
Power of Attorney for Health Care and Financial Needs
Students over the age of 18, though unable to legally drink in the United States, have the exclusive right to privacy over their health care, their grades, and their financial records. For parents used to eighteen uninterrupted years of complete control of their child’s medical, financial, and legal affairs, to be unceremoniously excluded can be a jolt.
What many parents often don’t realize is that if their student is injured or falls ill while away at school, hospitals and doctors are legally prevented from sharing health information to anyone without a medical power of attorney. Usually, a power of attorney naming the parents and signed in the home state will apply even if the student is away in another state – but there are exceptions, so parents should check on this.
A durable power of attorney is necessary to grant parental or guardian access to bank records, grades, social media, and email accounts. Without this, parents may have to resort to the courts for access to these records, a costly and time-consuming exercise that may be overwhelming in an already stressful situation.
Sitting down with your student to discuss the reasons why assigning parents or a trusted adult the power of attorney is also an occasion for a life lesson. At some point in the future the roles may be reversed and the parents may be asking their student to be their power of attorney. See the article from Financial Advisor for more information.
Vehicles
Having a car on campus is a privilege usually allowed only to older students, and most (especially those at larger schools farther from home) are excited to take advantage. From an insurance standpoint, there a few key things to keep in mind:
1. Vehicle usage: Inform your insurance advisor when your student leaves for college in the fall. If the college is more than 50 miles away from home and the student is taking a vehicle, rating is different than if they’re away at school without a vehicle.
2. GPA credits: There are often discounts on the parents’ automobile policy if the student maintains a “B” average or better. Colleges only release transcripts to students, even though parents pay the bills, so parents may need to ask students to send a screen shot or copies of their grades to send to the insurance agent. Remember that the eligibility for these credits starts as soon as young drivers are licensed, so if your high schooler is already maintaining a 3.0 or higher, it’s a good idea to make sure your insurance advisor knows.
3. Driving vehicles belonging to roommates: It is our recommendation that roommates not share vehicles, although we realize that this may not be the most welcome advice. A roommate’s coverage may not extend to your student to drive their vehicle or may have far lower limits of coverage than your own policy. Be sure the roommate obtains approval in writing from their insurer or broker before letting others drive their vehicle. Parents likewise should ask their insurance advisor if roommates are covered to occasionally drive their students’ vehicle. Many, but not all insurers will consider this permissive use without adding the driver to the policy, but it’s important to remember that if your child’s roommate has an accident with your car, the responsibility is yours and a claim surcharge will likely follow at renewal.
4. Title new cars in the name of your student: Students in college will soon be 21 and often fully independent soon thereafter. It is best to title newly acquired vehicles designated for the student in the name of the student, saving the trouble of having to transfer the title once the student graduates and moves out of the family home. When the graduate is busy with work they may be unable to find the time to complete the sometimes labor-intensive steps to transfer the title. As long as the student is a member of the household, most insurers will allow the car to be added to the family policy even if titled in the name of the student. Parents should encourage newly independent graduates to purchase their own policies to limit the parental liability incurred if there is a serious accident and to ensure the graduate has the full policy protections for rented and borrowed vehicles - adult children who no longer live in the household are technically only covered to drive the vehicles on the family policy.
Other Issues: Health Insurance
Although health insurance is not our purview, as parents and former college students, we urge you to closely review the college plan coverages offered by the college’s health center. Many college plans are not as comprehensive as the family health insurance plan, and the potential savings of removing the student from the family health plan may be less appealing with that in mind.
Chartwell Bulletins are produced by Chartwell Insurance Services, an independent insurance broker specializing in the personal asset protection of discerning individuals. Chartwell Insurance Services is not affiliated with any of the vendors mentioned in the article and does not accept compensation for referrals to them
A representative of Chartwell Insurance Services will be pleased to discuss all aspects of your personal insurance.
Contact Rebecca Korach Woan at 312-645-1200 or rwoan@chartwellins.com