Make Sure Your College Student Is Covered
Your insurance policies might not provide your child the coverage he needs while away at school.
My son is about to start college and will be living in a dorm this year. Will my homeowners insurance cover his computer and other electronics in his room? And do I need to tell my auto insurance company if he won't be taking a car there?
The parents' homeowners insurance generally covers students' possessions if they live in a dorm. But each insurer has different variations on the rule, so let your insurance company know that your son is going to college and ask about the details.
Some insurers limit the coverage for items in a dorm room to 10% of the parents' total coverage for possessions, which may not be enough if your son has a lot of stuff. Find out about any limits and add up the value of his possessions -- they can be surprisingly expensive, especially if he has a new computer, stereo system and other electronics.
If you'd like extra coverage, then you can buy him a renters insurance policy. You'll also need to buy a separate renters policy if he moves to an off-campus apartment, which generally isn't covered by the parents' homeowners insurance. Renters insurance prices are low -- generally about $300 a year or less to cover all of the student's possessions and to provide liability coverage if someone gets injured in his apartment. Buying the coverage through the company that provides your homeowners and auto insurance could give you a discount on all of your policies.
And, yes, it's important to let your auto insurance company know that your son is going away to college. If he moves more than 100 miles away and doesn't take a car, your premiums could drop by up to 30% -- and he'll still have coverage when he drives while he's home for vacation.
There's another important insurance issue for college kids: health insurance. Ask your health insurer how long you can keep your child on your own policy. Most let you keep children on your coverage as long as they're full-time students, up to age 23 or 25 (and several states are increasing the cut-off age to the high twenties and even 30. See A Break on Health Insurance for Young People for more information). If your child's college is in another city, though, find out if doctors and hospitals in his area are considered to be in-network providers and how much he'd have to pay for going out of the network, which could get expensive if you have an HMO based in another city.
If your policy isn't the best option in his new town, be careful before signing up your son for a student health insurance policy. Some of these policies have low premiums but also low coverage limits. They limit total coverage to just $50,000 or $100,000 and limit certain types of surgery and other care to just a few thousand dollars, which could leave you with tens of thousands of dollars in out-of-pocket expenses if your child has a major accident or illness. Look at the exclusions and coverage limits section of the policy, and make sure it has at least $1 million in maximum coverage -- $3 million to $5 million is even better.
Another option is to get your son his own health insurance policy -- not just student coverage -- which could have more-extensive coverage. In most states, a healthy child in his twenties could get a high-deductible health insurance policy with robust coverage for about $100 a month.
If your son is not considered your dependent for tax purposes and he has a policy with at least a $1,100 deductible, then he can also qualify to open a health savings account, which allows him to make tax-deductible HSA contributions of up to $2,900 in 2008 (the annual contribution limit rises a bit every year). The money can grow tax-deferred for the future and be used tax-free in any year for medical expenses. You can even give him the money to contribute to the account, which can help him accumulate a big stash for future costs. For more information about health savings accounts, see Health Savings Account Answers.