College kids may be young and fearless, but that doesn't mean they're immune to illness, theft or even lawsuits. To be sure, student insurance coverage is as important a decision to make as course curriculum and perhaps a monthly allowance. But what types of insurance do your children need?
Even if your kids don't think they need it, they may not have a choice. Nearly one-third of colleges and universities require kids to have student health insurance upon enrollment, according to a 2008 study by the Government Accountability Office. But thanks to the new health care law, young adults not covered by an employer-provided plan can remain on their parents' health care plan until age 26. That's usually the best bet because employer-based health insurance is usually the most comprehensive.
However, students moving far from home may not have access to providers in your plan. If they're out of network, you may have to pay a higher deductible and co-insurance. Dave Evans, senior vice president of the Independent Insurance Agents & Brokers of America in Alexandria, Va., recommends reviewing your health care plan during open enrollment season this year. Try to pick one for next year that's flexible on out-of-network providers if your child is attending a faraway college. Another consideration is that companies are making employers pay more of the premiums for covering dependents. If there are gaps in your plan, Evans suggests setting up a health savings or flexible spending account to set aside money for student medical expenses. "If your daughter needs to see a specialist out of network, your account can cover out-of-pocket costs," Evans says.
Another option is a student health insurance plan from the school. The GAO study states that more than half of colleges sponsor their own plans for full-time students. The annual premium averages $850. Mark Kantrowitz, publisher of college financial-assistance websites FastWeb and FinAid, says these student insurance plans do a good job covering immunizations and handling colds and the flu, but not so much for larger medical issues. "They typically have more limited benefits and more exclusions than traditional plans," he says.
Most student insurance plans limit catastrophic coverage to a maximum of $50,000 per accident or illness, the GAO study reports. Some even have caps on the amount they'll pay for specific services. Many also exclude coverage for injuries sustained while under the influence of alcohol or drugs. If students do opt for the school's plan, read the specifics first. Evans says it should provide catastrophic coverage of ideally $500,000. It also should offer coverage for prescription drugs, mental health care, preventive care and medical evacuation for students studying abroad.
If parents don't have health insurance, students can opt for an individual plan. Health plans listed on eHealthInsurance had annual premiums as low as $600 a year for basic coverage to healthy 18- to 22-year-olds. There are also individual plans specifically for college students. The best known one is GradGuard, offered by the nonprofit College Parents of America, as an individual plan that offers a wider choice of providers than college health plans. The basic plan covers up to $500,000 per condition, and the premium plan covers $750,000. For college students younger than 26, the annual premiums range from $930 to $2,885, depending on the specific plan and the deductible. The downside is if your kid has a chronic health problem such as asthma, he or she may not be able to get an individual student insurance plan, or at least an affordable one. While the health care reform law will prevent insurers from denying coverage to anyone with pre-existing medical conditions, that provision won't kick in until 2014.
No matter where your college-bound student ends up living, he or she definitely needs insurance to cover theft and damage of personal property, such as a laptop, stereo and bicycle. In a rental, the landlord's insurance doesn't cover their items if stolen or damaged due to fire, theft or other circumstances.
If you have homeowners insurance, your child's personal property is covered if she lives in a dormitory and usually covered if he or she lives off campus, says Bill Wilson, associate vice president of education and research for the Independent Insurance Agents & Brokers of America. Usually most homeowners insurance policies will allot 10% of personal property to a student not living at home. "So if you have a $100,000 policy, your kid will have $10,000 of coverage," Wilson says. But he advises students to make a list of possessions and estimate their value. "Add up the Xbox, laptop, TV, bicycle and clothes, and it could be more than you think."
Some student insurance may not cover college kids living by themselves off campus. Check your policy or contact your agent to see if the kids are covered, or consider renters insurance. According to the National Association of Insurance Commissioners, premiums average from $15 to $30 per month, depending on rental location and size as well as the policyholder's possessions. Like a homeowners policy, you can choose between personal property and liability coverage, and cash value or replacement cost coverage.
If your kid is bringing a car to campus, it will be covered under your auto insurance. Insurers still consider college students as household residents just living away from home temporarily. But check if the car's new location will change coverage, Wilson says.
"If your daughter is moving from a rural area to downtown or is parked on the street instead of (in) a garage, your premiums may be adjusted," Wilson says.