Health Insurance for College Students

My son is just about to start college, and I'm wondering what to do about insurance. His college offers student health insurance. Is that usually the best deal? And will my homeowners insurance cover the electronics in his dorm room?

Be very careful before signing up for student health insurance through your son's school. Some student health policies have low deductibles but also very low coverage limits -- sometimes as low as $50,000. These policies can be dangerous to your finances -- leaving you with tens of thousands of dollars in uncovered expenses if your son has a major accident or illness.

Instead, it's much better to go with a policy that has a maximum coverage limit of $3 million to $5 million or more. You may be able to keep your son on your family's policy up to age 23 or 25, as long as he's a full-time student. And some states have raised that age cut-off to 30. Contact your insurance company to find out about the rules.

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However, be careful if your son's college is in another city: Find out if doctors and hospitals in his area are considered to be in-network providers, or how much he'd have to pay for going out of the network.

If your son is healthy, then he might find a better deal on his own. Get price quotes from eHealthInsurance.com or find a local health insurance broker through the National Association of Health Underwriters. Premiums can be less than $100 per month, depending on your son's state and health (the policy will be a lot more expensive in states such as New York and New Jersey, which require insurers to charge the same rates for everyone, regardless of age).

You can lower the premium even further by raising the deductible, which can be a particularly good deal for young healthy people who have few regular medical bills. They need health insurance primarily to cover large, unexpected expenses, such as a major accident or illness. A high-deductible policy with high coverage limits can do the best job of providing this catastrophic coverage at an affordable price.

And if your son is not considered your dependent for tax purposes and has an policy with at least a $1,100 deductible, then he also can open up a health savings account, which lets him contribute tax-deductible money that can be used tax-free for future medical expenses. You can even give him the money to contribute to the account, which can give him a giant head start on building future savings if he keeps the money in the account for years.

The dorm room issue is much easier. Children are generally covered by their parents' homeowners insurance if they're living in a dorm. But ask your agent or company about any limitations. Some policies, for example, limit dorm-room protection to 10% of the parents' total coverage for possessions. Your son's computer, electronics and other stuff could be surprisingly expensive to replace, so do a quick calculation to make sure you have enough coverage.

Parents' homeowners insurance policies, however, generally don't cover a child who lives in an off-campus apartment. In that case, you usually can buy an inexpensive renters policy for just about $200 to $300 per year, which will cover his possessions as well as liability if anyone is injured in his apartment. Buying renters insurance through the company that provides your homeowners and auto insurance could give you a discount on all of the policies. Be sure to tell the insurer whether your child's name is on the lease.

While you're talking with your insurer, also ask about auto insurance discounts. If your son moves 100 to 150 miles away for college and leaves the family car at home, your auto insurance premium may drop by up to 30%, yet he'll still be covered when he's home on vacation.