College insurance CliffNotes

Personal Finance

August 29, 2006|By Eileen Ambrose | Eileen Ambrose,Sun Columnist

National Student Services Inc. is not affiliated with Fireman's Fund Insurance Co. An item in Eileen Ambrose's column in yesterday's Business section might have given the impression that they are.

Students descend on college campuses carting billions of dollars in clothes, electronics and furnishings to dorms and apartments.

Do they need to insure these belongings? Maybe.

Natural catastrophes and thefts occur on campus just like back home. For instance, lightning this month ignited a dorm fire at a Virginia university. And more than 41,600 burglaries were reported at colleges in 2003, according to the Department of Education. Campus thieves usually make off with iPods, cell phones, textbooks and computer laptops, says Gretchen Cathey with National Student Services Inc., an insurer catering to college students.

But deciphering insurance coverage isn't easy, even on something that seems so simple. Coverage differs from company to company, state to state. Even insurance experts offer confusing advice.

So here's the CliffNotes version of coverage at college:

Students who don't bring big-ticket items to school or can easily afford on their own to replace damaged or stolen items don't need to buy insurance.

Besides, there's a good chance they are already covered under their parents' homeowner's policy. Parents need to read their policy or talk to their agent.

Chubb Group of Insurance Cos., for instance, covers students living on and off campus. State Farm Insurance Cos. will extend coverage to college students as long as they remain dependents. And Allstate Insurance Co. says it has similar student coverage in its Maryland policies.

But even if a student is covered under a homeowner's policy, check the limits. Often policies cover electronics or jewelry only up to $2,500, which might not be enough for the entire family, says Carolyn Gorman, a spokeswoman with the Insurance Information Institute. Parents might need to buy additional coverage.

Some homeowner's policies limit the protection for college students in other ways. For example, a student's coverage might be 10 percent of the parent's home coverage or $1,000, whichever is greater, according to the National Association of Insurance Commissioners.

That may be enough if a student lives in the dorm. But students living in their own apartment with a flat-screen TV and new furniture might need more.

Those students, as well as those not covered by a parent's policy, should consider renter's insurance. Besides reimbursing students for damaged or stolen property, the policy often includes liability coverage in case someone is injured in, say, the student's apartment. "If the pizza delivery many slips and falls, they'll be covered for lawsuits," Gorman says.

Renter's insurance runs about $15 to $30 per month, says Debbie Pickford, an Allstate spokeswoman.

There are also a variety of personal property insurers that sell policies specifically targeted at college students. A typical policy at National Student Services and Fireman's Fund Insurance Co., for instance, costs about $125 a year for $5,000 in coverage and a $25 deductible.

Parents often carry high deductibles on homeowner's policies to keep their own premiums down. Some parents buy these small policies for students so they can get reimbursed for small claims, such as $80 for a stolen textbook, says Cathey, of National Student Services.

When buying insurance, students will have an option of "replacement cost" or "actual cash value" coverage. Experts advise choosing replacement cost, even though it's more expensive.

That way, the insurance company will pay the full amount of what it costs to replace items, even if they're old. Actual cash value will only pay the cost of items minus depreciation, which can leave students kicking in more money to replace property purchased years ago.

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