Ensure your kids are covered
Students who rent are not always insured by their parents’ policy
Auckland – 29 January 2014 – Tertiary students who rent could be risking starting their careers in debt if they accidently damage another person’s property and assume they’ll be covered by their parents’ contents policy, says AA Insurance.
“Students can’t necessarily rely on their parents’ contents insurance policy to cover them when they’re living away from home,” said Suzanne Wolton, Head of Customer Relations, AA Insurance. “While it pays to check with your insurer, in most cases students will need to take out their own contents insurance, or consider the types of places they move in to.
“Parents are often surprised come claim time when they discover their policy doesn’t cover the loss of their child’s property from a flat, or the damage they may have caused to their landlord’s rental,” she added. “It’s not commonly understood that even if you don’t have insurance, but damage someone else’s property and it’s your fault, then you’re still liable to cover the cost, either in one payment or over a period of time. This will happen whether or not the owner of the property has their own insurance.
“Each year we see a handful of students risk significant debt because they hadn’t taken out insurance, while others are counting their lucky stars that they did.”
One AA Insurance customer, who was glad he took out a policy, was renting with other students when he woke to find their apartment flooded. One of his flatmates had come home the night before and hung a coat hanger in the sprinkler, which set it off. The flood extended to a number of apartments on eight other floors. As our customer had contents insurance to the value of $15,000, he was covered for $2,500 worth of damage to his belongings, as well as temporary accommodation. Crucially, his policy also provided him with cover for up to $1 million of legal liability. This came in handy when the landlord’s insurer attributed the blame for the flooding to the three flatmates collectively, as they had all signed the tenancy agreement. AA Insurance paid out for his contents and was able to protect our customer from a debt of $26,700.
“Insurance isn’t just about protecting your property; it’s also about protecting yourself from potential debt and financial difficulty,” continued Suzanne. “By taking out insurance, you also have legal liability cover, which means if you are directly, or indirectly, responsible for accidental damage to someone else’s property, then your insurer will cover you – up to $1 million for home and contents, if you are insured with us. For contents insurance the cover extends to those within your household, including pets.”
Parents need to consider that without insurance their children may not only face financial strife, but also the possibility of a significant dent in their credit rating. For students, this could curb their ability to get loans or mortgages, as well as affect their employment prospects.
A 2013 Massey University study found 80% of flatting students did not have contents insurance. Many recognised the importance of insurance but often argued that they didn’t have anything of value worth insuring; yet most had a computer, phone, clothing and other personal items that could be expensive to repair or replace.
One student was living in a flat in Wellington to attend university. Believing he would be covered under his parents’ contents policy, he had not taken out his own insurance. However when his $5,000 bike, and only mode of transport was stolen, the theft was not covered because he, and his belongings, were no longer kept at his parents’ home.
In another example, the son of an AA Insurance customer had moved into an Auckland flat to continue his studies. He was out for dinner one evening when his car was broken into and possessions stolen, including a laptop, clothing and shoes. While his parents had contents insurance, sadly their son did not, so the theft was not covered.
“Accidents can and do happen, no matter how careful you or your flatmates are. While your belongings may not be worth much, and can be replaced, it’s the damage caused to another person’s property that could cost you dearly,” said Suzanne. “If you are a student, or just renting, simply having insurance could give you financial peace-of-mind.”