PART FIVE OF A FIVE-PART SERIESFreshmen Heather Caldwell and Emily McKenna admit that they know practically nothing about insurance - and they aren't alone.
"I don't really think ahead about stuff, just about getting through the next test," McKenna said.
Senior Sarah Oldham, on the other hand, has more knowledge about insurance than most college students. Oldham took classes and passed a state-mandated test to get licensed to sell many types of insurance, including health, life, auto, renter's and homeowner's. In June, Oldham will assist her father in opening an AllState Insurance office in Indianapolis.
"We as students are really not educated on insurance," Oldham said. "I think people didn't buy it because they don't know about it."
Dana Kerr, assistant professor of finance and risk management insurance, said it's especially hard for students to see the benefit of insurance when they don't have a claim to make.
"What you did get out of it was more of an intangible benefit," Kerr said. "You have the uncertainty of some future event basically removed, and so for a lot of people that are kind of risk averse, you get peace of mind out of buying insurance."
Experts say many students do not consider insurance a necessity, which could cause them problems in the future. Students in college and those approaching graduation should be equipped with knowledge to help them make informed decisions about health, renter's and automobile insurance.
HEALTH INSURANCE
Full-time college students, like McKenna and Caldwell, are usually covered by their parents' health insurance until the age of 23 or until they graduate, Kerr said.
If students do purchase their own health insurance, Kerr said they should check out the university's policy first because it is probably cheaper.
Larry Cistrelli, director of Risk Management and Insured Benefit Programs, said about 600 students are signed up for Ball State's program. With this plan, students are covered up to $100,000, and the annual cost of coverage is $736.
"The difference is that if you go for a private company you can probably buy much more and much better insurance, but it will cost you," Cistrelli said.
Most students don't think they need health insurance, so they don't buy it, Cistrelli said. Others simply can't afford health insurance, he said.
Without insurance, however, students are setting themselves up for substantial debt if they are involved in an accident.
"At the minimum, what they should do is at least protect themselves against a really bad thing happening," Kerr said.
Students can choose from three types of plans: health maintenance organizations, preferred provider organizations and point-of-service.
PPOs offer more flexibility for a higher cost, HMOs restrict to certain network of doctors in exchange for a lower cost and PSOs combine aspects of the other two, he said.
"Health care costs are only going to continue to go up," Kerr said. "Health insurance premiums and health care costs, they've been rising, in some years at double digit rates."
RENTERS INSURANCE
Many students don't realize that if they live in the residence halls, their personal belongings are usually covered by their parents' homeowners insurance, Kerr said.
McKenna and Caldwell said they were surprised to learn that they are covered while living on campus. When they move off campus, however, that coverage will end.
Because of this, the women said they would consider buying renters insurance.
Kerr said a renters policy covers personal belongings, liability and additional living expenses.
Two types of coverage include actual cash value, in which the company accounts for depreciation of belongings, and replacement cost coverage, in which the company pays the cost of a new item.
Kerr said companies make the replacement cost coverage more expensive to help prevent fraud, such as a people lying about having an item stolen just so they can get a new one for free.
"There's a method to the madness," he said. "They're not trying to screw you. They're trying to reduce the probability of the people abusing them to get new stuff."
AUTOMOBILE INSURANCE
Although Indiana law requires drivers to have automobile insurance, about 20 percent of state drivers do not, according to the Indiana Department of Motor Vehicles.
If the car a student drives is in his parents' name, he will most likely be insured under his parents' policy. If students are buying their own auto insurance, though, Kerr said they could probably be OK buying the minimum state limit.
Students who own newer cars might want to consider buying collision and gap insurance, he said. Collision will only pay the depreciated value of the car if it is destroyed in a crash, and that might not provide enough to pay for the remaining car payments, Kerr said. Gap insurance makes up that difference.
"Believe me, there's nothing worse than continuing to make car loan payments when you don't have a car," he said.
Students who have old cars are probably better off buying the minimum coverage, he said, because collision insurance over several years could end up costing more in premiums than the car is actually worth.
Bob Fey, associate director of the University Police Department, said if drivers do not have proof of insurance when asked for it by an officer, they are issued a citation to court, Fey said.
"It is up to the officer's discretion as to whether that motorist can drive their car away without insurance," he said.
The Indiana Vehicle Code states that the penalty for driving without auto insurance could be suspension of either your license or vehicle registration, or both.
Penalties for driving without insurance range from 90-day or year-long suspension of a driver's license to having to pay hundreds of dollars to get the license reinstated, according to the Department of Motor Vehicles.
EDUCATION
Oldham said educating students should be the responsibility of both parents and insurance agents.
Oldham also plans to hold seminars to educate students about insurance when she is in charge of her own AllState insurance office, she said.
She thinks students are interested in insurance but don't know where to go for more information, she said. Oldham invites people to ask her insurance questions, and three strangers on Facebook took advantage of her offer by asking for advice, she said.
"It's really important for you to know what your coverages are and what your limits are," Oldham said. "If you get into an accident, and you don't know then you're leaving yourself open for lawsuits."
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