A Beginner's Guide to Tuition Insurance

By Elise Nelson on November 24, 2017

College is one of the biggest investments you’ll make in life, albeit an investment well worth the money. The problem is, life can throw some unexpected situations at you, and the unexpected doesn’t play well with finances. This might not be something you think about often, but what if something unexpected forces you to withdraw from school and forfeit that investment?

The average cost of higher education can get as high as $20,000 a year for state schools and $45,000 at private schools—that’s a lot of money to gamble with, especially for low-income families. The good news is, you can protect your investment from the unexpected with tuition insurance. Here’s everything you need to know.

What is tuition insurance?

Tuition insurance provides refunds to students who are forced to withdraw from college mid-semester, usually for medical reasons. In addition to covering tuition costs, most tuition refund insurance plans also cover room and board, academic fees, and other education-related expenses.

Typically, tuition insurance exists to help students with sudden injuries, mental health conditions or, sometimes, chronic illnesses that may interfere with their education. However, some parents consider purchasing tuition insurance plans simply to be prepared for the unexpected. This is more common when parents pay out of pocket for a school with high tuition costs.

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It’s important to note that tuition insurance is meant to be coupled with your school’s refund policy. Schools may still partially refund tuition costs to you based on a declining scale. Essentially, if you are further into the semester when the withdraw happens, you are likely to receive a smaller refund from your school. Tuition insurance will then cover the rest of the costs.

What circumstances does tuition insurance cover?

The list of covered reasons depends on your insurance plan and provider. However, there are companies that sell “premium” packages covering all unforeseen reasons for withdrawal, including lack of interest in the education.

Most plans include coverage for unexpected illnesses or injuries, student deaths, and psychological or mental disorders. Other possible covered reasons include job loss or relocation, parent death, or disciplinary suspension or expulsion from school. It may seem practical to purchase a tuition insurance plan for a student with a chronic illness, but be sure to research your options, because some plans exclude pre-existing conditions.

“Some plans reimburse 100% of covered costs; others reimburse only 50% to 90% of the amount of money you lose by withdrawing,” according to Consumer Reports.

Tuition insurance plans will require you to document all claimed expenses and submit paperwork to the provider for approval. In medical cases, you will likely need to provide a doctor’s written recommendation to withdraw from school. While mental health cases are typically covered by tuition insurance, you may need to provide proof of hospitalization for 24 to 48 hours prior to the withdrawal.

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Who offers tuition insurance?

Tuition insurance is offered by hundreds of schools through third-party providers. The most popular and trusted companies, serving students and parents since the 1930s, are A.W.G. Dewar and Allianz Global Assistance.

A.W.G. Dewar caters their coverage to more expensive colleges, but the percent of coverage does vary by school. For example, Dewar’s policy for Wellesley College is to cover 100 percent of tuition and fees in the event of injury, illness, or medical diagnoses.

On the other hand, students at Michigan University will only receive 85 percent of their paid tuition back for the same reasons. Dewar caters their prices to each school specifically, but generally the cost of a plan is $400-$600.

Allianz Global Assistance offers three different plans, all covering illness and injury, the death of a student, and psychological or mental disorders.

The Essential and Preferred plans don’t cover any reasons beyond this, but the higher-cost Advantage plan does. Allianz’s cheapest plan, Essential, has a flat rate of $29.95, but the payout is only up to $2,500. The other two plans require a school-specific price quote, but cover 80 to 100 percent of tuition and fees. You can find a breakdown of each plan here.

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Other noteworthy companies with tuition refund plans are GradGuard and Education Insurance Plans.

How do you know if tuition insurance is right for you?

The need for tuition insurance is primarily based on your financial and medical situations as well as the refund plans your school offers. If you do have a chronic illness that may become debilitating, or you’re at risk of developing an illness, tuition insurance may be a good choice. Be sure to investigate tuition insurance plans carefully to see if it is right for you.

“Most students are young and healthy, so for most families, the insurance is unnecessary,” according to Shannon Vasconcelos, the director of college finance for College Coach. But, if losing tuition money will have a big impact on your family’s finances, the peace of mind that tuition insurance brings will be worth it.

By Elise Nelson

Uloop Writer
Elise is a senior at Albright College in Reading, Pa, studying journalism. She hopes to pursue a career in feature writing and editing for a magazine. Much of Elise's time is dedicated to being Editor-in-Chief of Albright's student newspaper, The Albrightian. She is also a member of Sigma Tau Delta English Honors Society, and co-hosts a radio show on WXAC 91.3 FM.

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