This is a delicate time to dump extra expenses on students living away from home and their parents, but $200 or so for tenant insurance could be a smart purchase.
Students attending university or college away from home should have the cost of tuition and accommodations squared away now, and the shock over textbook prices should be wearing off. Now, it’s time to look at insurance.
There’s property insurance to consider – students need coverage for their belongings, and against liability claims if the property where they are living is damaged or someone is injured there. It’s also worth thinking about car insurance. It’s possible to get a discount when insuring kids away at school so they can drive the family car when visiting home.
Students who use the family home as their primary address – they plan to move back home at the end of the school year and have not officially moved out – may be covered to some extent by their parental home insurance policy. Two things to check: Is there a dollar limit on coverage extended to a student’s belongings, and does coverage apply if the student lives off campus? Some companies may extend coverage only to students living in residence.
In cases where a student is covered by a parental home insurance policy, there may be a dollar limit on the value of belongings covered, say $10,000. Liability coverage for the student should be the same as indicated on the parents’ policy – usually $1-million.
Be thorough about seeing whether the limited amount of coverage for belongings under a parental policy will be enough. “You want to be sure that you’re covering all belongings – everything from textbooks to yoga pants,” said Rebecca Conlin, a customer service specialist at Sonnet Insurance. “Students will want to take their apartment and flip it upside down. Anything that falls out is your personal belongings.”
Tenant insurance adds to the expenses of students and parents, but it makes sense on a couple of levels. For one thing, it insulates parents from premium increases if their child makes a claim. Tenant insurance also offers the comfort of knowing a child has a set level of coverage, regardless of whether he or she lives in residence or off campus.
“It’s a pretty quick, low-cost, low-hassle type of insurance,” said Janine White, vice-president at the online insurance marketplace Kanetix.ca. “It’s not uncommon to see $25,000 to $50,000 worth of coverage [for belongings] and $1-million in liability for $20 per month or so.” Note: The standard deductible for tenant insurance is usually $1,000.
University residences may require students to buy tenant insurance. If a student is living off campus, Ms. White urges them to be up front with an insurer to disclose whether they have roommates. She said some firms may not issue a policy if there are multiple roommates.
Students can get tenant insurance for as long as they need it, and then cancel. But Ms. White said there’s a case to be made for hanging onto it to build a history as a claims-free customer. This may help a young adult get a more competitive rate on home insurance down the road.
For car insurance, parents should see whether their insurer offers a “student away from home” discount. This discount could reduce the cost of listing the student on your policy by as much as 30 to 50 per cent. This price break applies when students attend a university or college that is typically 80 to 150 kilometres away from home. Coverage applies when the student returns home after the school year, and during periodic visits home.
Taking a student off the parental car insurance policy altogether can be costly when that student gets his or her own coverage later on. Having a record of being continuously insured helps contain the often stiff cost of young people insuring their vehicles.
“Over all, I do recommend leaving the student on [the family insurance policy],” Ms. Conlin said. “It looks good to have absolutely no gaps in coverage – you build up your insurance record.”
Finally, students with good grades may be eligible for a car insurance discount. According to ThinkInsure.ca, full-time students between the ages of 16 to 25 who have a B average or better may qualify for a discount of as much as 10 per cent. The thinking here is that a student who maintains good grades will be a responsible driver.
PERSONAL FINANCE COLUMNIST
The Globe and Mail, September 17, 2018