A colleague of mine recently opined about the joys of paying for his son’s college tuition. He said it’s like buying a new car each year and driving it off a cliff.

A four-year college degree is a costly investment, to be sure, but the potential costs could grow exponentially once your child moves to off-campus housing. It’s not the room and board that parents need to worry about or the loss of personal property—a stolen laptop or cash or a beer-stained carpet that will need to be replaced at the student’s expense. Those financial hits are minor compared to the cost of facing a personal liability lawsuit.

Everything changes when a child moves from on-campus dormitories into his or her first real apartment or house. Students are faced with temptations and hard choices, and they are more exposed than ever to the reality of being held liable for, say, property damage or injuries that occur at their new home. If a guest is injured during a party—a twisted ankle on a wet kitchen floor or a catastrophic fall from a balcony—a lawsuit can be brought against the tenants. Regardless of whether the parents are on the lease, they may be held financially accountable and compelled to pay legal fees or settlements.

Tales of Whoa!

Consider the following scenarios, which are based on real events. A group of college students moved into a third-floor apartment and hosted a party in which alcohol was served to underage students. An 18-year-old attending the party became intoxicated and walked out onto the balcony, where he slipped through the balusters and fell to the ground. The resulting injury left the teenager paralyzed. He and his parents filed a lawsuit against the college and the building owner, who, in turn, filed third-party actions against the tenants, based on the town’s social host liability laws. The tenants and their parents were forced to pay a settlement worth more than $10 million.

In another incident, police were called to an off-campus home after a receiving a noise complaint. While inspecting the home, a police officer slipped in a puddle of beer on the kitchen floor and injured his back. The resulting lawsuit grew to involve the property owner, the tenants and all the attendees of the party. The final settlement was paid, in part, by the parents’ homeowners policies.

And just so you don’t think all off-campus housing lawsuits involve alcohol, a group of students living together were sued after a fire ignited in an apartment during spring break. The building owner alleged that the students were negligent because they failed to turn off an appliance that started the fire. The parents had cosigned the apartment lease and, subsequently, were named as defendants.

Jeff Cox, president and CEO of Lloyd Bedford Cox, Inc., an insurance agency in Bedford Hills, New York, is well aware of the increased exposure that young adults and their parents face when kids move off campus. Cox, who has a daughter in college and a son who recently graduated, meets regularly with clients who have college-age kids, and he warns them of the added risk that comes with off-campus living.

“I tell them if their children are signing leases, the parents need to be sure their liability insurance is extended to cover the off-campus housing,” Jeff said.

Jeff recalled a story of a college student who was grilling burgers on the deck of his off-campus house. The deck caught on fire and spread to the rest of the house. The student was clearly liable for the damage. Thankfully, his parents’ homeowners insurance policy provided coverage.

Auto-matic Exposure

Most college students that move to off-campus housing also bring cars to school. Young drivers are already a high-risk proposal, but the combination of youthful indiscretion and newfound independence exacerbates the risk. Too often, young drivers away at school will lend their vehicles to other students, but the liability remains with the owners and, usually, the owners’ parents.

“When they lend their cars out to friends, they are taking their parents’ assets and putting them on the table,” Jeff said. “When kids get to driving age, parents should reconsider their limits of liability.”

Let’s be clear: Adequate insurance coverage is crucial, but talking to your kids is equally important. Parents can help protect their college-age children and themselves by inspecting the off-campus residence, helping to interview potential roommates, reviewing rental agreements and educating their kids about their responsibilities as a tenant.

Parents may not be able to prevent their children from throwing parties while away at school. But they can offer advice, such as limiting the number of guests and having a plan to end the party if it gets too rowdy. If the home has a small balcony or rickety old deck, those areas should be kept off limits. In fact, parties held in any outside areas could attract unwanted attention from neighbors and, ultimately, the police, and should be avoided. Underage drinking may be the norm at most college campuses, but your children should refuse to serve alcohol to minors.

In addition to advising their children how to party safely and responsibly, parents can help inspect a rental property before they move in. Many rentals near college campuses are older homes in relatively poor condition. Parents and their children should do a walk-through of the rental and take notes of any problems, such as a cracked sidewalk, rotting floor boards, a missing handrail or a leaky faucet. The landlord’s failure to repair these deficiencies may help the tenants and parents defend themselves and reduce their potential liability if a lawsuit is filed.

Moving to an off-campus residence is a big step for college students on the road to independence. There will be bumps in the road and the occasional flat tire. In the end, there may be some college debt—for the students and the parents—that will linger well after the pomp and circumstance. Sound parental advice, smart decisions, and an insurance program that addresses key exposures can help ensure that a big lawsuit settlement isn’t part of that remaining debt.