New graduates moving away for school or work often need renters insurance to cover losses from theft or property damage.
As 2024 high school graduates prepare for dorm life or apartment living, insurance is likely the last thing on their minds. While their parents’ homeowners policies may cover up to 10% of stolen or damaged items, there are several circumstances in which college students and other young adults need property insurance. Now is a good time for an insurance check-in for those under 26, according to Michael Giusti, analyst for insuranceQuotes.com.
1. Pitfalls of parents’ policies
Young adults moving into a campus dorm have limited coverage under their parents’ policies. However, this does not extend to students living off-campus in an apartment. Renters insurance is crucial to protecting personal items in an apartment setting because the landlord’s policy only covers structural damage to the building and apartment.
“One of the things about relying on the parent’s homeowners policy is that the deductible applies and you don’t always want to be making claims on your homeowners insurance,” says Giusti. “If the kid drops their laptop and it breaks, that might not make sense to claim on a homeowners policy but with the lower deductible and not having the hit on your homeowners insurance, claiming that against a renters policy makes more sense.”
Homeowners and renters insurance policies offer personal liability protection, according to Giusti. For example, a college student pulls a fire alarm or destroys dorm property and the school presses charges. Giusti added, “Or if they just run off at the mouth on social media and get sued for defamation, the renters policy would protect them there too.”
2. Choice of major matters
Some college majors require more supplies and equipment than others. A photography student with a high-end camera or a biology student with expensive lab equipment will need extra coverage supplied by renters insurance because their parents’ policy would not cover the whole cost of replacing the damaged or stolen items. Whereas a student focusing on creative writing or education may not have as many high-priced personal belongings to protect in their dorm or apartment. In that case, their parents’ homeowners insurance would suffice.
3. Federal flood insurance necessary for some
Students and young adults entering the workforce often look for low-budget housing, which may lead them to a basement or first-floor apartment. These units not only make young adults vulnerable to break-ins but also to flooding. Homeowners and renters insurance policies do not cover flood damage, so Giusti recommends young adults purchase federal flood insurance.
While there are some drawbacks to relying on parents’ policies, Giusti notes it’s typically best for young adults to stay on the parent’s health and homeowners insurance, unless they are living in an apartment or storing pricey items in their dorm room. He recommends investigating insurance options and making sure all parties understand their policies.
Teaching young adults about insurance
Parents work to prepare their children for college and adult life in many ways including balancing their finances. Giusti says, “You also need to teach them to protect the things that they have and protect themselves from liability.” That conversation should not only cover property insurance but also health, life and auto insurance policies.
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