What is tuition insurance?
Tuition insurance is a type of insurance that covers the cost of tuition if a student has to drop out involuntarily and unexpectedly. These policies vary widely in what circumstances they actually cover, but the most common reasons are for medical issues or death.
How does tuition insurance work?
Much like policies for more commonly insured items like cars or homes, tuition insurance offers reimbursement in the event of an unexpected circumstance or accident. And much like health insurance, tuition insurance also tends to be more expensive if it offers to cover pre-existing conditions.
For pricing, many calculate it based on a particular price per amount of total tuition. For example, for basic coverage, they may ask for $150 per $10,000 of tuition. Using that formula, if the student’s tuition costs $30,000, the price of the plan would be $450 (or $150 times 3).
However, it’s important to note that every plan is different, so paying attention to the small print is essential when choosing.
The amount of the refund also depends on the plan; you should not assume that the plan covers the entire cost. Some plans only cover 50 to 90% of the cost of tuition, depending on what specific reason the student had to leave school.
What kind of circumstances are covered by tuition insurance?
Yet again, we must stress: it truly depends on the plan. However, the most common things tuition insurance may cover is if the student:
- developed a life-changing, ongoing medical condition (either physical or mental).
- had an accident that drastically impairs attendance.
- passed away or a student’s parent or guardian passed away.
A few policies cover any unforeseen reason that may prevent the student from finishing their education, but these tend to be the most expensive and may come with high penalties. And they often do not cover drug use or failing out.
Also, although mental health disorders are often covered, they often only pay out a percentage of the tuition instead of the full price.
Whatever the covered circumstances, insurance providers will always require extensive documentation or a doctor’s note for proof. Be sure to keep any documentation very safe and be clear regarding the kinds of documentation they specifically want.
Should you get tuition insurance?
Before buying tuition insurance from a third-party agency, check to see if the school itself has its own refund policy. Chances are, many of the issues an insurance agency would cover are also covered by the school itself.
Students with known, recurring, and inhibitive medical issues may find peace of mind by purchasing tuition insurance, especially as most of them specifically focus on that reason for payouts.
Students pursuing their higher education at a high-cost institution may also want to look into it. There’s a lot of money at stake and anything can happen — but keep in mind that policies that would payout for any reason are fairly rare.
Even so, the practice of buying this kind of insurance is not common or required, and many experts say it’s not worth the cost. Weighing your chances of dropping out carefully can save you from unnecessary expenditures — whether or not you decide to get tuition insurance.