A back to school insurance review is vital for anyone with children living at college or boarding school. Whether it's the first year away or the last, going away to school has several insurance implications that need to be addressed to ensure adequate coverage.
Students living away from home for the first time present new worries for their parents. What if they have friends at their dorm and someone gets hurt? What if they forget to turn off an appliance and cause a fire? What if their laptop is stolen?
Many schools require first-year students to live on campus, so renter’s insurance may not be necessary. Some insurance companies include student housing in their definition of a covered location, but it pays to check with your agent. If the policy language is unclear or if the policy does not automatically include student housing, a liability extension endorsement can be added to the policy for a very modest increase in premium, usually less than $50 annually. The endorsement changes the home insurance policy to provide liability coverage to include a student's dorm room at school. With this extra coverage, if someone gets hurt in their dorm, there is now no question about coverage.
But what about all the stuff they brought with them to school? Most home insurance policies will provide coverage for property located outside the main residence, with some restrictions – usually 10% of the property limit on the home insurance policy. For example, if your home insurance policy provides you with $200,000 of personal property coverage, up to 10% of that limit ($20,000) may be automatically covered while at college or boarding school.
There are two drawbacks to using this approach to cover property located in a dorm. First, the deductible from your home insurance policy would apply to the loss. If you have a high deductible on your home insurance policy, a small personal property claim at the dorm may not clear your deductible. Secondly, Loss of Use coverage (or sometimes called Additional Living Expense) does not extend to other locations listed on the policy. Let’s say a pipe bursts in the dorm, causing damage that will take months to repair. There is no coverage for additional living expenses you might incur while your child is living elsewhere.
If you don’t want to accept these policy limitations, a separate renter’s insurance policy should be implemented. Renter’s insurance will provide liability insurance for the dorm, or off-campus address listed in the policy, as well as the personal property at that location. The amount of personal property coverage is usually subject to a minimum amount ($20,000 to $25,000 is common), but a separate policy will allow you to secure a lower deductible, keep any losses from showing up on your home insurance policy, and provide you with Loss of Use coverage. Expect to pay around $200 per year for a basic renter’s policy.
Whether you choose to extend coverage or take out a renter’s policy, don’t forget to list this location on your personal umbrella policy.
Itemized personal property
If you’ve made a significant financial investment in a laptop for your student, it may make sense to itemize it on your home insurance policy – much like you would a new piece of jewelry. Some insurance companies don’t like to schedule laptops, but it pays to check. Expect to pay between $20 and $25 per-thousand of coverage.
Paying this additional premium gives you extra coverage for misplacing the laptop and accidental damage, with no deductible applied to the claim.
Free wi-fi might be a great way to attract students to a coffee shop or a study room, but it is also a great way to become a victim of identity theft. Your son or daughter might have your credit card information or other personal data on their cell phone, exposing you to financial loss. Many home insurance policies offer optional cyber liability coverage by endorsement. The amounts of coverage can vary widely, and there may even be customizable limits within the endorsement, so a conversation with your agent is essential.
If your son or daughter does not bring a car with them to school, you may be able to get a discount on your auto insurance. Most companies will provide an “away at school” discount if the school is at least 100 miles from home.
If they bring a car with them to school, coverage will need to be amended to show a different “garaging location." Depending on the state and the insurance company, a separate auto policy may need to be written if the car is garaged in a different state.
It is also important to remind your son or daughter that the insurance follows the vehicle. If they let their roommate, a friend, or a friend of a friend borrow their car, the insurance on the car pays for the claim. By extension, this means your personal umbrella would also cover the claim if the claim was severe. Strongly discourage your child from letting anyone use their car while it is with them at school.
And DO NOT let them sign up as a driver for Uber or Lyft while they are at school. They might think it’s a good way to make a few extra dollars, but there are absolute coverage exclusions on auto insurance policies when vehicles are used as a taxi or livery service. Uber and Lyft provide their own insurance, but there may be coverage gaps as to when their coverage applies and when it does not and how it coordinates with your own policy. The risk far outweighs the financial reward.
Have questions about a back to school insurance review? David Miller has answers. Miller, who writes the monthly, DID YOU KNOW? blog is The Plexus Groupe's Vice President, Client Executive for Private Client Solutions. Miller can be reached by calling 846-307-6141.