Education: Insurance is always the best policy

The last thing students worry about as they enter the world of university or college is insurance. But in these days of grant abolition, tuition fees and parental contributions to finance, insurance is not something that can be ignored, especially if students don't finish their course.

The Department for Education and Employment says that a total of 17 per cent of undergraduates do not complete their university or college courses - 35 per cent on certain courses. As more and more parents are funding their children through higher education, this does not just mean bitter disappointment. It means an awful lot of money down the drain as well.

One company which has started insuring parents against the price of this is Saxon Insurance. It has developed a plan which protects against everything that leads to students leaving college - from sickness and accident (including stress and exam failure), to pregnancy, prison sentences and even suicide. The only thing that is not covered is a simple change of mind.

Brian Wright, of Saxon, says: "Most parents of university-aged children are in the 40-65 age bracket; regarded as high risk due to the higher chances of redundancy and ill health. What we offer is cover with no medical underwriting to protect against the costs involved if something goes wrong with their child's education.

"Many parents of children bound for university did not go to university themselves - a result of the massive expansion of higher education this decade - and so are not aware of the risks involved. Naturally, they want to play safe. Basically, if there is insurance available, some parents are going to want it."

For parents who are about to watch their beloved offspring disappear in to the wide blue yonder of higher education, they are bound to be full of natural worry concerning their children's safety. Parents and students alike should be aware that, as students have limited cash and tend to live in areas that may have high crime rates, they are more vulnerable to crime, a statistic highlighted in a survey for Woolwich Homewise. Cardiff police reported last week that 75% of burglaries in the city occur in the Cathays district, the student home mecca of the city.

Before any student goes off to the various insurers, the first thing they need to do is check the existing home contents insurance on their parents home. Many, though not all, insurers cover students' possessions away from home as "temporarily removed". Not only does this mean that students can claim on their parents policy, but the policies often provide better returns than a specific student policy.

John Sawyer, of Royal & SunAlliance, outlines his company's policy: "We provide automatic free cover for students when their permanent address remains at their parents house. A student really only needs their own policy if they are physically "leaving home", and do not return to their parents during the holidays.

"There is no reason why existing home contents policies cannot cover all a student's requirements. There is no obligation on parents to inform us when their children go to university, we generally do not impose any extra conditions on the existing policy, and we also cover all the usual disasters and mishaps that can happen to anyone."

Not only is it cheaper and one less worry for students to be covered by their parents policies, they generally get better returns from these policies than if they had their own. Royal & SunAlliance gives up to 15 per cent of the total insured on the policy for "temporarily removed" students (often more than the value of all their possessions), and also replaces on a new-for-old basis. This cover is provided by most insurers. "We really recommend it for students," says Mr Sawyer. "Not only is it easy and straightforward, but we feel it is an added bonus for our customers who stay with us for years."

The thing with students, though, is that they are desperate for their independence. So if they want their own insurance, where do they go?

Endsleigh Insurance is the insurer supported by the National Union of Students - not surprising as they were formed in 1965 and are still part owned by the NUS.

Dominic Cerillo, Endsleigh promotions manager, says: "We were born to serve students 35 years ago, and that is who we aim to serve now. Due to our links with the NUS and our history of providing for students, we believe that we understand students, and empathise with their particular lifestyles, better than anyone else."

This is one reason why it promotes its policies as having no "forced entry" clauses, so that in halls of residence, where students rarely, if ever, lock their bedroom doors, students do not have to prove that their rooms were broken into if something is stolen .

Endsleigh's widespread presence on student campuses - they have an office on 51 university sites with more in the pipeline - makes them an easy option for students wishing to take out their own insurance policies.

But there is competition in the student insurance market, a recognition of the fact that, not only are students a vulnerable group, but there are so many of them now that good business can be made. As Mr Cerillo says: "We are finding that increasing numbers of students are taking out insurance due to the areas they are living in, and that companies like ourselves are communicating with students more effectively and providing tailored cover."

There is no doubt that individual student policies are affordable. Endsleigh's basic premium is pounds 18 a month. But Saxon Direct, the new player in the student insurance market, is offering a glitzy package - Student Shield - from only pounds 15 a month, covering all possessions to their full value on a new-for-old basis. Saxon claims to have researched student needs for three years and believes it provides a real alternative to Endsleigh, which has been accused of using its relatively unchallenged position to keep premiums high.

As higher education costs rise, it is inevitable that students, and parents too, may wish to skimp on what could be seen as an unnecessary expense. But there are affordable options out there to match the needs of Britain's ever-expanding student population.

If you leave it and hope for the best, good luck. But if you'd rather have piece of mind, then insurance is the sensible option. The decision is yours.

Endsleigh Insurance (01242 866866); Saxon Direct's free guide to insurance (0116 264 4618); Association of British Insurers (0171-600 3333)