Written by John Regan, former Director of Sales, for equity research

Question: I had a scary moment on campus the other day when I couldn’t find my car. I was convinced that it had been stolen. It hadn’t, of course – I’d just forgotten where it was! But still, it made me wonder how I’d deal with losing something so valuable. My insurance doesn’t cover vehicle replacement. I don’t have any other insurance except, I think, for health insurance – but I don’t really know how that works, either. Should I have insurance on my dorm room? My computer? I can’t afford to pay thousands if someone breaks into my room or wrecks my car. Will insurance bring me peace of mind? Help!

Answer: Insurance can seem complicated, because there are so many different policies and so many different regulations. But, of course, all insurance works in essentially the same way: a company offers a large number of people the chance to pay a small regular rate in exchange for a type of coverage. If a customer has an issue that is covered by the policy, the company draws on some of the money it has generated to help the customer pay for expenses related to the problem. The customer may still be expected to pay an amount up front (before the insurance kicks in) or share a percentage of the cost with the company as money is spent. You probably already know the terms for these things: the regular rate is a “premium,” the amount a customer has to spend before insurance kicks in is a “deductible,” and shared costs are “co-pays.”

If the insurance company does the math right, it can provide a valuable service while still keeping a profit for itself. And these companies do profit and grow: the insurance industry wrote $1.2 trillion in policies last year. A trillion is a million millions, written as a one followed by twelve zeroes!

You almost certainly already have some insurance coverage. For instance, you mentioned that you had a car, and that means you must have car insurance (the law requires it). You are also required, as of this writing, to have health insurance.

Homeowner’s insurance is, as the name implies, for homeowners. But homeowner’s insurance typically covers more than a physical home; according to one modern luxury appliance retailer it will also cover the more expensive things in your home, from luxury kitchen appliances and other built-in systems to personal belongings like clothes or collectables. Homeowners tend to have homeowner’s insurance: an incredible 95% do, which works out to around 70 million insured homes.

But you live in a dorm, not a home that you own. Can you get insurance that covers the things in your space? In fact, you can: renter’s insurance is the policy that would apply here, and it covers things inside of your space in a way that is very similar to homeowner’s insurance. Interestingly, renter’s insurance is not as popular as homeowner’s insurance. 41% of renters carry coverage, compared to the aforementioned 95% of homeowners.

Before you buy renter’s insurance, though, call your parents. Some homeowner’s insurance policies extend coverage to policy holders’ kids and their dorm rooms, so you may already be covered and not know it! This is less likely to be true of off-campus apartments.

Insurance is often sold through brokerages, and while some brokerages cover a wide range of policy types, there are also those that provide single types of niche insurance offerings. According to one such niche broker at OurLifeCovered, focusing on such a hyper-specific type of insurance gives them a much better understanding of the needs of the individual policy holders and allows them to make much more targeted recommendations for them. In many cases, it is also possible to buy insurance directly from providers.

We have spoken so far about policies that reimburse you, but you do not have to be the benefactor of your own insurance policy. With life insurance policies, policyholders pay premiums in exchange for coverage they will not be around to see. Life insurance is designed to support loved ones and to cover things like funeral costs and lost income. It is popular among breadwinners and providers. That is no surprise given that 70% of households with children under 18 would have trouble with living expenses within months after the death of a breadwinner.

While we cannot make any specific recommendations for your situation, you should know that insurance companies are experts at calculating risk. The limited amount of things you have in your dorm room (which campus security helps to protect) will cost less to insure than a large amount of valuable things in an unsafe area. You may want to look into renter’s insurance to gain the peace of mind you mention in your question.

“A man’s home is his castle.” – Proverb