The most trending tax and financial industry issues.

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Lane Keeter, CPA

Partner: Tax Consulting, Estate Planning, and Heber Springs Managing Partner

Insuring Your Kids In College

It's just the beginning of summer, but many college age kids are gearing up to head to college, if not already there. And with them goes their stuff!

It's not like it used to be, where the most expensive thing a college kid took with him might be a cheap stereo. Today, it's not unusual for students to have a virtual army of computers, plus smart phones and other high-tech devices, all of which they consider absolutely essential.

This may be in addition to expensive clothing, sports equipment, high def TVs, gaming systems; well, you get the picture!

But what if something happens to those things? Few college students could afford to replace everything at once should their place be burglarized, or a disaster destroys everything they have at school.

But won't your own homeowners insurance policy cover that?

If you have a standard HO policy, it will generally include basic protection for adult children who are away at school, up to a certain age, provided these students still maintain their primary residence as their parents' home. This is likely true even while they're living in a college dormitory.

Coverage on students residing away from home while attending college is typically more limited than it is for those still living in their parents' households. A coverage limit of 10% of the insured value of parental belongings is fairly common.

Additionally, the relatively high deductibles that will apply on most HO claims before the policy will pay benefits may make them a poor fit for insuring property in a college setting.

For example, the claim may involve the loss or theft of a laptop or mobile device with a fair market value of just a few hundred dollars. If the sole coverage in place is the parents' homeowners policy, an incidence of dorm theft may fall well below the usual deductible. The policy doesn't provide meaningful protection to the cash-strapped college student.

Also, repeated small claims could cause your insurer to raise premiums or worse, cancel your policy.

So, to better ensure your policy stays in place, many insurance professionals recommend not filing on smaller claims that are barely above the deductible. The policy should also provide the maximum limit of coverage to protect against a catastrophic loss to your home and belongings.

An alternative to consider is renters insurance.

Often, a renters policy is a better choice for students attending college, even if they're eligible for inclusion on their parents' policy. These policies typically have lower deductibles that are more appropriate for dormitory or apartment living. They're relatively inexpensive, with premiums averaging $200 to $300 per year for $15,000 in protection against loss or theft.

If the student has additional property to insure, such as a high-end musical instrument or additional electronic gear, it's also generally easy and affordable to buy a higher limit, if desired.

Now, let's consider health insurance issues.

Currently, parents can keep full-time students on their own health insurance plans until the age of 26. In most cases, this is a better choice than enrolling in more limited plans available through colleges. Many college plans, for example, exclude injuries related to drugs and alcohol, which your own plan will usually cover. College plans may also put a cap on catastrophic coverage, often limiting it to $50,000 per incident.

If your plan is an HMO or PPO, it's important that you look at the available network care providers not just where you live, but also where your student will be going to school. If your network has no authorized care providers in the area, you may have to make other arrangements.

Contact your health insurance professional for more information or to explore other options.

Another consideration is regarding auto insurance. If your college student is driving a car you own, you're still responsible for insuring that vehicle. This is true even if the college student and the car are away at college full time.

If the car is routinely stored in a location other than your residence, you must inform your insurance carrier, as different rates may apply. Also, be sure your child is on the list of authorized drivers for the policy.

Advise your child not to let friends borrow or drive the car. Also, remind your student that, if he or she chooses to drink, it is now a relatively simple matter to get a cab or ride home via a ride-sharing service such as Uber or Lyft. Because of these issues, more and more families are opting to send their students to school without a car at all.

What if a student with a car decides to earn extra money by driving for a ride-sharing service? In such cases, check with your insurance carrier or agent regarding whether additional insurance is required.

And finally, you may want to consider umbrella liability coverage.

Sometimes, large liability claims arise that are beyond the limits of typical homeowner policies. For this reason, it's often prudent to own umbrella insurance. This insurance provides additional coverage to protect you and your child if either of you incur a liability that maxes out your homeowners, renters or auto insurance.

For example, suppose your auto insurance policy provides liability coverage, but only up to $100,000. If your student causes an accident that does $500,000 in damage, your umbrella insurance policy can pick up the other $400,000, or any other amount up to the limits of the policy that you'd otherwise have to pay out of pocket.

If you're not sure what level of insurance you need for your college students who live away from home, ask your kids to take an inventory of what they have with them. Then, talk it over with your insurance agent. This could save you much time, money and aggravation later.

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