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College students should study up on renter's insurance

Today’s typical college student arrives at school with a bunch of possessions, including a laptop computer, a TV, a smartphone and lots of clothing. It’s important to insure those belongings against the unpredictable, and that's where renter's insurance comes into play.

“It’s peace of mind. In the unlikely event of a loss, renter's insurance gives kids and their parents enough money to replace their belongings,” says Deb Quinlivan, senior product consultant at MetLife Auto & Home.

Most renters don't have insurance

renters insurance for college students

Renter's insurance can be a lifesaver when a fire, tornado or theft happens, yet more than half of U.S. renters don't have this coverage. According to USAA, the average two-bedroom residence contains more than $20,000 in personal property.

For roughly $10 to $20 a month, the typical renter's policy will cover a student’s personal belongings -- such as furniture, clothing and household items -- at an apartment, a house or even a dorm room. The coverage also provides liability coverage, which legally protects the policyholder if a visitor gets hurt (even if the tenant's dog bites someone).

With a renter's insurance policy, your household belongings even are covered when they're in your car or in storage.

The average cost of renter's insurance is $12 a month for about $30,000 worth of property coverage and $100,000 worth of liability coverage, according to Relocation.com.

Some policies renter's policies also feature identity protection services at no additional cost. Other companies charge for the protection; at State Farm, for instance, the extra coverage for identity theft costs $25 a year.

Landlord won't cover your belongings

Quinlivan says renter's insurance can be particularly important if a student lives in an off-campus house or apartment, since the landlord’s policy won't cover tenants' belongings. For example, in the event of a fire, the landlord’s policy would pay for damage to the structure. “But the renter would be left on his own to pay for the replacement of his personal belongings and additional living expenses until he can move back into the damaged unit,” Quinlivan says.

Before school starts, parents should determine the value of a son's or daughter’s personal property and buy the appropriate amount of insurance. Quinlivan says making a list of the student's personal property help in buying coverage and in settling a claim in case of fire, theft or another tragedy.

Actual cash value vs. replacement cost

Finally, when reviewing possible policies, look closely at the settlement options, which will explain how a claim is taken care of when there's a covered loss.

If a policy lists “actual cash value,” that means a settlement would factor in depreciation -- a reduction in value based on the age and condition of personal items.

If a policy lists “replacement cost,” it will pay for the actual cost of replacing the items up to a policy's coverage limits. The replacement cost option likely is more expensive than the actual-cash-value option, but it offers extra protection.

“Purchasing a policy based on a lower rate without understanding what coverage is being provided and whether it really meets the needs of the student can open a student up to costly risk,” Quinlivan says. “So can selecting a coverage limit that is not sufficient to replace personal belongings in the event of a loss.”

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