The grant will not go far, and it is tempting to make savings wherever possible. But sometimes avoiding bills is a bad idea, and insurance cover may pay for itself several times over. Students are often burgled.

Some students are automatically insured. Several universities, such as Exeter, have arranged for contents insurance to be incorporated into the rental at halls of residence.

Many other universities offer hall residents the option of insurance at much lower costs than the students could arrange for themselves. Rates are usually around just pounds 10 a year, but do vary according to risk, with inner city addresses costing more.

Even those not covered by their university's insurance may not need to their own policies. Some are covered by their parents' policies, or can extend them for a modest charge.

"We are happy to extend parents' policies, at virtually no cost, but there is limited cover," says Ray Morley, a Commercial Union spokesman. "The cost depends on the university's situation. It is a few pence extra on the parents' policy."

Mike Timmons, assistant manager of the non-life department at the Co- operative Insurance Society, said: "We are prepared to issue policies to students, but normally only if we already issue policies to the family. It would be a separate policy."

The CIS and some other insurers will sometimes approve claims under parents' policies for possessions taken out of the home. Students are likely to be expected by an insurer to still regard their parents' house as their normal home, going back there at weekends and holidays. They may otherwise be regarded as having moved out, and therefore not covered by their parents' policy. It is sensible to talk honestly with parents' insurers before taking out a policy.

Students' who need stand-alone cover are likely to be directed towards Endsleigh Insurance, especially if they ask the National Union of Students for advice. The NUS set up Endsleigh, and still holds a 16 per cent stake in the company, so is not impartial. There are now other insurers who specialise in student policies, which can be cheaper.

Alan Broad, of Watchout Student Insurance, deals with several specialist insurers, and says that each assesses risks differently. "Living in a hall of residence anywhere in the country will cost about pounds 25 to pounds 28 a year, for pounds 2,000 cover. If you are living in a shared house the rates vary enormously.

"Inner city Wolverhampton is effectively black-listed by Endsleigh, which restricts cover to pounds 1,250, with a pounds 99 premium. But Guardian, with a policy taken out by the parents, gives pounds 2,000 cover for a cost of pounds 65 to pounds 95. The Campus policy from Barclay Alexander will cost pounds 35 for pounds 2,000 cover."

Inner city Liverpool and Manchester are also highly rated, with rates varying greatly between insurers. Each insurer uses post codes to assess risks, but the same post code may be considered a different risk by different insurers.

The main clearing banks, Harrison Beaumont Insurance and Andrew Copeland Insurance all offer competitive premiums, and it is sensible to obtain a variety of quotations, asking about premiums, level of cover, any excess and any reasons why a claim would be disallowed, before choosing a policy.

Students should also consider how to reduce risks. Many policies will pay out only if there has been forced entry, which means that it is vitally important to be able to trust the people accommodation is shared with - and their friends who they invite back late at night.

The National Union of Students' press officer Louise Clarke said: "Security is something to bear in mind when choosing flats. The cost of replacing even small items far outweighs the cost of insurance. When looking for privately rented accommodation check the security, and if it is not good enough ask the landlord to put it right. But it is no good if you can't get out - there is a big risk of fire in student flats. Many are badly converted buildings."

Endsleigh Insurance: 01242 223300; Watchout Student Insurance: 01993 772809; Harrison Beaumont: 01404 41762; Andrew Copeland Insurance: 0181 656 2544.