Choosing Insurance for the College Life (Grades Not Included)

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.

“Most parents shy away from talking about these difficult things because they touch on our deepest fears,” said Christie Alderman, vice president at Chubb & Son, an insurance firm in New Jersey. But, she noted, not talking about a risk does not make it go away.

I have written about the physical safety risks faced by children away at college. This week, I want to look at what insurance can do to reduce other types of risks faced by many college students.

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. The insurer USAA said premiums could be as low as $10 a month for $2,500 in coverage, with more comprehensive policies offering $100,000 of coverage for $30 a month.

Renter’s policies have the additional benefit of teaching children about fiscal responsibility. “That first renter’s policy begins to build the child’s financial responsibility and insurance résumé,” said Ken Kilday, wealth manager at USAA.

Of course, the résumé could be tarnished if the child loses everything and files mountains of claims.

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.

Aetna announces it will stop selling child-only health insurance polices in most states in October

Aetna announced today that it would stop selling child-only individual health insurance policies after October 1, 2010. A child-only policy is one sold to [for] a child who is under the age of 19. Many parents who cannot afford to insure the whole family will buy a policy just to protect the health of their children.

The announcement affects only new business sales. Aetna policy holders who already own a child-only plan will not be impacted by new rule. Current policies will continue as written and these policies will also be renewable. Child-only polices had been written under the Aetna Advantage Plans for Individuals, Families and the Self Employed.

Is change in response to new federal law?


Under the Affordable Care Act, insurers who sold health insurance policies would be prohibited from excluding children with pre-existing conditions from coverage beginning in 2010.

Just after the signing of the new federal law, insurance company lawyers attempted to argue that children with pre-existing conditions would have to wait until 2014 for guaranteed issue coverage, just as adults do.

The Obama administration through Health and Human Services Secretary Kathleen Sebelius immediately announced that it would publish regulations making the change effective September 1, 2010.

The insurance industry grudgingly accepted the direction. Karen Ignagni, CEO of America’s Health Insurance Plans (AHIP), responded that the insurance industry would “fully comply” with the principles set forth in the Secretary’s letter. AHIP is a trade organization and political advocacy group that represents over 1300 insurance carriers.

Are insurance companies finding new ways to avoid the requirements of the federal law?

Aetna admits the reason for stopping the sale of child-only policies is to allow the company to handle the upcoming changes which resulted from health care reform. Specifically Aetna notes that the requirement to insure children under the age of 19 on a guaranteed issue basis with no guidelines as to coverage requirements has the potential to increase the cost of these policies and make them unaffordable.

What remaining options are available for child-only policies?

Aetna says that if an application for a child-only policy is submitted for an effective date of October 1, 2010 or later, the underwriters will suggest the following options for covering the child:

add the child as a dependent to a parent's plan,
apply to your state’s CHIP plan (if eligible), or
check with federal government for alternative options at www.healthcare.gov
Currently the federal website has no options to suggest for child-only coverage.

Aetna’s announcement has indicated that this policy will become effective on October 1, 2010 in the following states: AK, AR, AZ, CA, CO, DC, DE, FL, GA, IL, IN, KS, KY, LA, MI, MO, MS, NC, NE, NV, PA, SC, TN, TX, VA, WV, and WY. A later announcement will establish the effective date for the change in CT, MD, OH, and OK

HHS permits insurers to establish open enrollment periods for child coverage

Responding to concerns that the new health care law’s prohibition on denying coverage to children with pre-existing conditions would significantly drive up costs, the U.S. Department of Health and Human Services (HHS) has clarified that plans may set up specific enrollment periods. Insurers had predicted that the non-discrimination coverage requirement that takes effect for most plans beginning on or after September 23 would result in parents enrolling their children only once they became sick.

Amid reports that many insurance companies were considering dropping child coverage altogether, the HHS on July 27 issued a fact sheet explaining, in question and answer format, how the prohibition on pre-existing condition exclusions applies to insurers offering coverage to children under 19 years old in the individual market. Specifically, the HHS clarified that:

Insurance issuers in the individual market may restrict enrollment of children under 19 to specific open enrollment periods – the number and length of such periods to be at the insurer’s discretion – if permitted under state law. Insurance issuers must abide by more stringent state laws, if applicable, that require issuers to maintain a continuous open enrollment period or regulate the number and/or frequency of these enrollment periods.

Child-only individual market insurance plans that existed on or prior to March 23, 2010, and that do not significantly change their benefits, cost sharing, and other features, will be “grandfathered” and thus exempt from the regulations prohibiting pre-existing condition exclusions.

The administration will issue new regulations if it determines that insurers are using their enrollment periods to limit coverage access, or if children with pre-existing conditions are being diverted inappropriately from Medicaid or the Children’s Health Insurance Programs (CHIP) to private insurance plans.