Kids, College and Insurance

You may need to make adjustments to your policies to make sure your child is covered when he or she goes to school.

My daughter will start college in a few weeks and I'm wondering what I need to do about insurance for her.

You should contact your insurer before your child goes to college. You may need to make a few adjustments to protect her and her belongings while she's away -- and you could save some money in the process.

Car insurance. If your daughter moves 100 to 150 miles away for college and leaves the family car at home, your car-insurance premiums could be trimmed by up to 30%. And she'll still be covered when she's home on vacation.

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If she takes one of the family's cars with her to college, your premiums will rise or fall depending on the type of car and the location of the school (if it's in an area with higher insurance costs). Contact your insurance company or agent for your best option. It's usually a good idea to keep your child on the family policy so she can benefit from any multicar (or multipolicy) discounts, as well as any breaks you've accumulated for being a longtime customer.

This might also be a good time to shop around to see if you can get a better deal. The companies that offer the best rates for empty-nesters with children at college may not be the same as the ones that offer the best deals for young families. You can find rates from many companies at (opens in new tab) or find an agent in your area at the Independent Insurance Agents & Brokers of America (opens in new tab). Also see What You Need to Know About Auto Insurance (opens in new tab) and How to Trim Your Car Insurance Bill (opens in new tab) for more information about shopping for the best deal.

Renters insurance. If your daughter is living in a dorm, then your own homeowners insurance may cover her stuff. But ask your agent or insurer about the rules and limitations. Some policies, for example, cap dorm-room protection to 10% of your total coverage for possessions. Your daughter's computer, electronics and other items could be surprisingly expensive to replace, so do a quick calculation to make sure you have enough coverage.

If your daughter lives off-campus, however, you probably need to buy renters policy, which will cover her possessions and provide liability coverage if anyone is injured in her apartment. Policies tend to be just $200 to $300 per year, and buying renters insurance through the company that provides your homeowners and auto coverage could get you a discount on all of the policies. Be sure to tell the insurer whether your child's name is on the lease.

Health insurance. Even though most children can stay on their parents' policies while they're full-time students, find out what coverage the policy will provide if she's moving out of town. If you have an HMO that lets you use doctors and hospitals only in your area, your child could end up with big expenses for any visits to a doctor or hospital while away at school.

College health-insurance policies are one alternative, but be careful before signing up. Some policies have low deductibles but also very low coverage maximums -- as little as $50,000 per accident or illness, with limits of just a few thousand dollars for each kind of surgery or care. That could leave you and your child with tens of thousands of dollars in uninsured expenses.

If your daughter is healthy, she may do better to buy her own policy (go to (opens in new tab) or find a local health insurance agent at The National Association for Health Underwriters (opens in new tab)). Premiums for healthy people in their late teens and early twenties run as little as $50 to $100 per month in most states (except New York and New Jersey, where premiums for young people are much higher because insurers must cover everyone and generally charge the same rates).

She could save even more money by buying a policy that has a high deductible -- and high coverage limits -- which will protect her against major medical expenses. Many high-deductible policies now cover preventive care, which may be all she needs if she's healthy. And if her policy has a deductible of at least $1,150, she can open a health savings account and make a tax-deductible contribution of up to $3,000 in 2009, which she can use tax-free for medical expenses in any year. Most college students are unlikely to have an extra $3,000, but you could give her the money to contribute to the account. That would help her build up a stash to cover deductibles and co-payments in the future, when she may have more medical expenses.

See Score Big Savings on Health Coverage (opens in new tab) and Your Path to Cheaper Insurance (opens in new tab) for more information about shopping for coverage on your own.

Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.