New York Times – Choosing Insurance for the College Life

September 19, 2010

Paul Sullivan of The New York Times describes some of the vital risks that college families should consider in his September 17th article.   Please read the entire article here or see a summary of the highlights below.   Sullivan commentary is mostly aimed for wealthy parents, but much of the advice he highlights applies to all 19.7 million college students and their families.

The article does a great job of identifying the traditional risks such as the need for renters insurance, ID theft insurance and other more specific insurance programs that can help college families, but it falls short in several important ways.   GradGuard sees risks facing students in many other ways including the need for tuition insurance and the need for emergency medical evacuation insurance.   An important footnote, ID theft & resolution services, tuition insurance and emergency medical evacuation insurance are included with GradGuard’s Student Protection Plan.    The Student Protection Plan is an insurance and benefits bundle that provides real peace of mind to college students and their families.

Stay tuned for further insights and product innovations by GradGuard.  Until then read the highlights below:

“Many risks that college students face — from property and identity theft to liability cases — can be reduced through proper insurance. The problem is that many parents are as uninterested in talking about these things as their college-age children.

Yet the number of insurable risks faced by college students have gone up tremendously in the decades since their parents lugged stereos and crates of vinyl records into dormitory rooms. The reality is the theft of an iPod should be the least of most parents’ worries, because there are far graver risks. And that is why the start of college is a good time to review all the potential liabilities.

PERSONAL PROPERTY When most parents think of insurance, they think of theft and probably figure their homeowner’s policy covers it.  Most homeowner’s policies cover items like computers or other digital devices stolen from dorms. But Robert Courtemanche, chief executive of ACE Private Risk Services, said that the deductible on the policy still applied. “To get around this, parents could schedule items that are easily lost or stolen — such as a laptop — on their valuables policy, which has no deductible,” he said. “Or, they could ask if the college offers access to an insurance program with much lower limits and lower deductibles.”

For wealthy students who may go to college with expensive watches or jewelry, Mr. Laconi said putting those items on a valuable personal property policy was a must. An existing personal property policy may have been written based on the security of the child’s home. That may well change now that the child is living in a dorm.

For children living off campus, taking out a renter’s policy may make sense. These policies have lower premiums and deductibles to cover damage to furniture, appliances or the apartment in general.

LIABILITY The more serious risks are those that can ruin students’ lives — and their parents’ finances — like being sued by a student who drank a beer in the child’s dorm room and then got in a car accident. This is where liability, or umbrella, policies come in. Their coverage starts when the liability on, say, an auto policy is exceeded.

Most affluent parents have these policies, with $1 million to $2 million in extra coverage. But Ms. Alderman said Chubb had written these policies up to $50 million. She said the wealthy had to ask themselves, “Would your job title or role in the community make you an appealing target for a lawsuit?”  Mr. Laconi recalled a claim in which a family was sued because their son was working at a party where another student drank too much, fell down the stairs and died. Because of that state’s laws, the lawyers for the dead student’s parents sued the student with money, even though he had not served the dead student any alcohol.

He offered another situation, in which a student who had already been drinking showed up at a child’s dorm room. “I could give him one beer and no one knows where he drank the other six, and if he gets into an accident, I could be on the hook for the full amount of the litigation,” Mr. Laconi said.

For one, the child could borrow a friend’s car and get into an accident without being properly insured. Second, some liability policies can be negated without a base level of coverage in place, Mr. Kilday said. This is because liability policies cover claims above basic policies.

IDENTITY THEFT Then there are the risks of identity theft. There is much discussion about the online variety, but Ms. Alderman warned about the more basic theft of financial records from dorm rooms and the opening of credit cards in a student’s name.

“Children are often a victim of that because they don’t regularly check their credit information,” she said. “Identity theft is often perpetrated by someone the child knows, not through online shopping.”  Many high-end homeowner’s policies include coverage for some of the costs of identity theft. Chubb’s Identity Theft 911 can help with more complex cases. Chartis has coverage it calls Fraud SafeGuard for the same purpose.

LIFE INSURANCE It might seem as if no young student would need this coverage, but permanent life insurance can be helpful later on.

“At the time it was the worst gift ever,” he said. “Here I was thinking even clothes would have been better.”

But he said he borrowed against the policy for a down payment on a home. He is among several advisers to the affluent who say buying some form of permanent life insurance for your children is something that will only benefit them down the road.

Adam Sherman, chief executive of Firstrust Financial Resources in Philadelphia, said that the money in the policy grew tax-deferred and that many policies allowed the policy holders to borrow up to 90 percent of the cash value of the insurance. If they do not or cannot repay it, that loan is simply deducted from the ultimate death benefit.

The downside of a permanent life insurance policy is if the child does not keep it in place long enough. Anything less than five years is a waste, and it is better if it is kept in place for more than 10 years, Mr. Gordon said. And while parents are shopping for their children, they should also make sure they have enough life and long-term disability insurance for themselves in case something happens while their children are in college. “If you’re funding the college education out of cash flow,” he said, “you want to make sure there is something there to cover it if you’re gone.”

Thanks to Paul Sullivan for addressing many of the major issues facing college families.    We hope his next article will also include information regarding the importance of also protecting the investment in a college education for an unexpected illness, disability or injury with tuition insurance from GradGuard.

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