1. Check Insurance as Kids Prepare for College - WSJ.com#printMode Page 1 of 3
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AUGUST 24, 2009
FAMILY MONEY
Premium Opportunities
When your child leaves for college, it's time to revisit your insurance
By ALEKSANDRA TODOROVA
(See Corrections & Amplifications item below.)
As you prepare to send your child to college, there's the usual checklist. Laptop. Money. iPod. Laundry detergent.
And don't forget about insurance.
Reviewing your various insurance policies will not only protect
The Journal Report
your child at school—it may help you save some cash, too. Here
See the complete Your Money Matters report.
are few strategies to consider:
Claim Savings on Auto Policy
Your auto-insurance premium likely doubled—or even tripled—when your teenager first got a driver's license.
Now that he or she is heading to college, you can get some relief. As long as the campus is at least 100 miles away
and the car stays at home, you should qualify for a discount on your premium, says Robert Hartwig, president of
the Insurance Information Institute, an industry group based in New York.
Just how much will depend on how far your premiums went up in the first place: Parents usually get bigger
savings for their sons than for their daughters because premiums for sons are higher, says Robert Hunter,
director of insurance at Consumer Federation of America, an advocacy group in Washington, D.C.
If your child takes a car to campus, you can either keep him or her on your policy or have him or her purchase
separate insurance.
The latter will allow the student to start establishing a driving
record, but it likely will be more expensive than staying on a
parents' policy because any discounts—such as those for having
multiple cars on the policy—will be lost. In Indianapolis, for
example, it would cost roughly $400 more annually for a student
to have a separate policy, than to remain on a parents' policy,
according to State Farm Insurance.
Either way, don't be shy about touting your child's grades to your
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insurer. Most companies offer "good student" discounts. For
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instance, State Farm takes 9% to 35% off a premium, depending
on the student's gender and whether he or she is kept on the policy as an occasional driver or is at school.
Don't Forget the Dorm Room
A student's dorm room qualifies as an additional room to the family home—at least as far as your insurance
company is concerned. A homeowners' insurance policy covers all items that a child keeps there, but coverage
typically is limited to 10% of the amount of your total insured possessions, says Mr. Hartwig.
So if your child has high-end electronics or pricey furniture, check with your insurer about the need to purchase
additional coverage.
Generally, the value of contents in your home is insured up to 50% to 70% of the value of your home's structure.
If your home is valued at $100,000, for example, your insurer would pay $50,000 to $70,000 for the contents of
your house. Anything in your child's dorm room would be covered up to between $5,000 and $7,000.
That's not the case, however, if the student lives off campus. You
will need to purchase a renters' insurance policy if you want
items in off-campus housing to be covered. At an average $15 to
$30 a month, according to the National Association of Insurance
Commissioners, such policies cost less than most college kids
spend weekly on mocha lattes.
Check Your Health Options
As long as they are full-time students, children can be covered as
dependents on their parents' health insurance until they're 23
Smart Money's Aleksandra Todorova talks with Simon
Constable about the insurance issues parents should years old and, in some cases, even longer. Eleven states have
consider when sending your child off to college. authorized dependent coverage up to age 25, and New Jersey has
extended it to age 30. (Restrictions may apply. In New Jersey,
for instance, children don't qualify if they are married or have dependents of their own.)
But if you lose your job, you'll find yourself at an expensive crossroads: You'll need to decide whether to continue
dependent coverage through the Consolidated Omnibus Budget Reconciliation Act, or Cobra, which gives workers
the option to pay for continued employer coverage if they lose their job; purchase a policy for your child; or go
with the health plan provided by your child's school.
For most people, Cobra will likely be the most expensive route—even with a former employer covering 65% of the
premiums' cost, as mandated by the American Recovery and Reinvestment Act of 2009.
The premiums for university-provided plans and individual health insurance are similar—but coverage may not
be. Premiums for the health plans offered by Aetna Inc.'s Aetna Student Health, the largest university plan
provider, range between $500 and $2,000 per calendar year (the student is covered during the summer as well),
depending on coverage, according to Dale Grenolds, a senior vice president at Aetna. He says most cost around
$1,000.
Using the on-campus health center often is free. But at doctors' offices and hospitals off campus, your child will
have a co-pay of 10% to 20% of the cost of the visit for doctors and facilities within the Aetna network and 30% to
50% if he or she goes out of network.
Pharmacy co-pays range between 10% and 30% of the cost of the medications, depending on the plan and
whether you are buying brand or generic drugs. Some plans have deductibles, ranging between $100 and $250.
In addition, 20% of university health plans limit the maximum amount of benefits paid to $2,500 per condition,
according to a report on health-insurance coverage for college students issued by the U.S. Government
Accountability Office in 2008.
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Premiums for an individual policy run an average $1,284 a year for 18-to-24-year-olds, according to
eHealthInsurance.com, a marketplace for health-insurance quotes. If your child has a chronic illness, the cost
likely will be higher. The deductible on individual plans averages $1,932 per year, after which you'll pay up to $30
for doctors' visits and between 0% and 30% of the cost of hospital stays. If there's a prescription plan, co-pays run
as much as $35 for brand-name drugs.
Plan for the Worst
After his father died unexpectedly during his senior year in college, Herb Karl Daroff had to rethink his plans for
attending law school.
To afford law school, he had to take classes at night and work during the day. So for Mr. Daroff, now a Boston-
based financial planner, having adequate life insurance to cover your children's tuition payments in case of an
unexpected tragedy is a must.
Unless you bought inadequate life-insurance coverage when your first child was born, you likely don't need to
supplement the policy you already have. But if you don't have any insurance, Mr. Daroff says, consider buying
enough coverage to not only replace the income you would earn until you retire, but to pay for your children's
college education as well.
MetLife Inc.'s Life Insurance Selector, www.metlife.com/individual/financial-tools/life-insurance-
tool/index.html, can help you determine how much income-replacement coverage you need. If you're in good
health, you could generally find a $1 million 10-year term policy for less than $1,000 a year, Mr. Daroff says.
"The older your child is," says Mr. Hunter of the Consumer Federation of America, "the less life insurance you
need."
Corrections & Amplifications
Some insurance companies extend parents' homeowner-insurance coverage to their child's off-campus housing.
This column incorrectly stated that a student needs to purchase renters' insurance if they want items in off-
campus housing to be covered.
--Ms. Todorova is a senior writer for SmartMoney.com. She can be reached at atodorova@smartmoney.com.
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