More Back-to-School Lists Include Insurance

Evan Giordano took a laptop, phone, television and a couple of expensive suits when he left his family home in Newport Beach to go to college at USC.

The idea that these costly possessions might be stolen made his parents uneasy. So Giordano, 21, responded to a flier advertising a property insurance policy geared to college students.

He’s glad he did. Right before Christmas break last year, a pitcher of water spilled on his computer. That loss wouldn’t have been covered by his parents’ homeowner’s policy, yet it would have been crushing to his budget, he said.

Happily, it was covered by his specialized policy. “The computer was completely trashed,” Giordano said.

He faxed a claim for the $1,400 machine to his insurer. Within weeks, he had a new computer. “I was able to replace it before I got back to school,” he said. “That was awesome.”

The type of insurance Giordano bought -- student property coverage -- is relatively rare and little understood. But in today’s electronic world, insurers say, these policies are becoming more viable and available.

“Getting insurance to cover your stuff is generally not at the top of the list for the typical college freshman,” said Candysse Miller, spokeswoman for the Insurance Information Network of California, which represents insurers. “But if you think about what you bring into a dorm room these days -- computers, stereo systems, cellphones, iPods and tons of other stuff -- you realize you’ve got thousands of dollars at stake.”

Still, Miller said, few students buy coverage because many believe they’d be covered by their parents’ homeowner policies at school. To some degree they’re right.

The typical homeowner policy offers coverage of “unscheduled personal property” up to a set amount. A portion of that coverage extends to possessions taken out of the home, whether in your car or at school.

Generally, however, this coverage would be limited to about 10% of the limit on unscheduled personal property. In other words, if the homeowner’s policy covers $100,000 in personal property, only about $10,000 of the property in the child’s dormitory will be covered.

That might seem sufficient, but there’s a catch.

First, the child’s property is subject to the same deductible as the home. So, unless the loss exceeds the deductible on the homeowner’s policy, usually between $500 and $5,000, it will not be covered.

In addition, homeowner policies generally cover specified “perils” -- most commonly fire, theft, wind and rain, said Chris Heidrick, vice president of personal insurance at Fireman’s Fund in Novato, Calif. What they don’t cover is damage caused by the customer’s own mistakes or carelessness, like Giordano’s spill.

“If I’m riding across campus and my computer falls out of my backpack, that’s not covered under a homeowner’s policy,” added Heidrick, whose company offers policies through College Student Insurance Agency. “It would be covered under the student policy.”

The typical student policy allows the choice of a deductible ranging from $25 to $100. After that amount, the insurance pays, regardless of the cause of loss. (There are exceptions for extraordinary events such as nuclear war, terrorism and the seizure of property by law enforcement.)

Losses stemming from a rising tide of water -- like the flood that devastated a swath of New Orleans last year -- are not covered by a standard homeowner’s policy, but student property policies often cover that too, said Aimee McCracken, business manager at National Student Services Inc. in Stillwater, Okla., which markets student policies through colleges.

Indeed, National Student Services paid a record number of claims last year because it insured the bulk of students in a New Orleans college that was only blocks from a broken levee. “The whole campus was flooded,” McCracken said. “The students lost everything.”

The downside of student coverage: It’s extremely expensive considering how much property it covers, said Joseph Belth, professor of insurance at Indiana State University and editor of the industry publication Insurance Forum.

The coverage is generally purchased in small amounts, often from $2,000 to $10,000.

A replacement cost policy with $2,000 in coverage and a $25 deductible costs $50 at National Student Services and $60 at College Student Insurance. A $10,000 policy costs $250 at National Student Services and $214 at College Student Insurance.

Those prices work out to about $2 to $3 for every $100 in coverage. That’s five to 10 times more than the proportionate cost for homeowner’s insurance, which encompasses more risks -- damage to structures, property, liability and loss of use.

Moreover, Belth said, the idea of insuring items whose loss would not cause economic hardship defies the purpose of coverage.

“It gets back to the fundamentals of insurance,” he said. “It’s designed to cover major losses that you would have real difficulty covering yourself. In many cases, it’s just not necessary to buy insurance for something that’s only going to cost a few thousand dollars.”

Still, for parents whose kids are going to college and taking possessions they can’t afford to lose, it might be worth a look.

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Kathy M. Kristof welcomes your comments. Write to Personal Finance, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail kathy.kristof@latimes.com. For previous columns, visit latimes.com/kristof.