We are often asked by friends and family preparing to send their kids to college about student renters insurance. This is not surprising since many news stories and insurance agents offer differing views at this time of year. Some professionals have gone on record against the need for student renters insurance stating that homeowners policies extend protection to students when they are away at college. Others advise families to purchase specific coverage or "floaters" on select personal items (laptops, smart phones, etc.) and continue to rely on the home policy for broader coverage. Our approach is not to refute this guidance but to help make families aware of the practical value of a student renters policy and why homeowners insurance is not always the best solution.
Real Risk: Colleges and Universities work hard to provide a safe environment for students but the unexpected stuff still happens and the student is typically responsible for the loss. If a student or parent reads the residence hall policy closely, in most cases they will find the school is not responsible for damage or stolen property AND the student is liable for any property damage or bodily injury they cause. That means if their bike or laptop is stolen, the school does not replace it. It also means if a student inadvertently causes damage such as triggering a sprinkler system to go off when they hang their clothes on it (yes it happens a lot), they become financially responsible for the damage.
To pay for these losses, students and families may rely on their home policy, purchase renters insurance or absorb the claim financially themselves. Unless a family has the financial means to take on the risk, they should carefully review their homeowners policy and consider the following:
1. Coverage Limits: Most homeowners policies provide up to 10% of the personal property coverage for students away at college. As an example, a home policy with $50,000 of personal property coverage would provide up to $5,000 of coverage to the student. When you consider laptops, x-box, smart phones, tablets, bicycles, clothing, etc., it may not be enough and certainly something a parent should review with their agent.
2. Full-Time Requirement: Some homeowners policies provide coverage for students "enrolled full-time" which means coverage could be denied if a student was not taking a full time course load. I don't know many students that would call their parents and ask that they amend their home policy because they just dropped a class. Again, worth a discussion with your agent.
3. High Deductibles: Over the last several years, home insurance rates have been increasing mostly due to the historic weather related events. As such, many families have increased their deductibles to $1,000 or more to save money. These higher deductibles would prevent students from filing smaller but more frequent claims like bike or tablet thefts. Most student renters policies have deductibles at $100 providing a simple way to replace stolen or damaged items.
4. Increased Rates: In most cases, a parent's homeowners policy premium will increase if a claim is filed. That means a simple laptop replacement claim for $1,500 could result in an increase on the home policies for a few years. It also means when a family shops around for a better deal, they will have the claim on their loss record making access to preferred rates more difficult. Purchasing renters insurance for four years may cost them less than filing a single claim on their home policy.
5. Students Living Off-Campus: Some homeowners policies may limit coverage to students living on-campus. In fact, property management companies are now beginning to implement renters insurance recommendations or requirements before students move into their buildings. Again, more reason a parent or student should check with their insurance provider about their specific policy.
In many cases, a family may have adequate protection under the homeowners policy when their student is away at college. However, renters insurance may simply be a more practical solution when considering deductibles, coverage limitations and increased rates for filing a claim. Additionally, GradGuard's renters insurance is very affordable (usually about $160) and provides a simple way to protect students and their families.
Bill Suneson, Co-founder and Managing Partner, Next Generation Insurance Group, LLC, and www.GradGuard.com @BillSuneson