If you are an average American with kids in college, the cost of sending each child though a four-year program may be more than what you paid for your home. If you have to foot the majority of that bill yourself, you may wish to protect your investment should your child fall ill and have to withdraw from school. That is where tuition insurance comes into play.
Tuition insurance generally refunds 100% of the tuition for the semester in which the withdrawal takes place, and it may also cover auxiliary fees such as room and board, books, and other academic fees depending on the policy. In cases of a sliding scale refund, tuition insurance may make up the difference (for example, if withdrawal after two weeks is refunded at a 50% rate by the university, tuition insurance will pick up the remaining 50%).
Refund and withdrawal policies vary by university with respect to the withdrawal date, withdrawal circumstances and reimbursement amount -- so learn those before you shop for tuition insurance. Some universities offer tuition insurance as an option during the registration process, and a few take the choice out of your hands by actually requiring tuition insurance.
A.W.G. Dewar is a specialist in the field and has offered polices for many years, but they have been joined by other providers in recent years, including GradGuard, Tuition Guardian, Markel Insurance, and even Sallie Mae.
Costs vary significantly, but a typical yearly cost ranges from $200-$600 depending on the coverage chosen and the risks the school poses (some schools have higher withdrawal rates). Another way to look at it is that costs generally range anywhere from 1-5% of the school's collective tuition and fees.
Tuition insurance covers medical-related withdrawals and death of either the student or the tuition payer (aka you). It will not cover voluntary withdrawals that are not related to a medical condition – mere homesickness does not count, but emotional or mental disorders that are medically verified are covered. A hospital stay of at least two days is usually required.
Other conditions that are generally not covered are generic failure to attend classes, medical conditions arising from drug or alcohol use or similar self-inflicted harm, criminal activity, suicide, and injury from involvement in demonstrations/protests. Check the exclusion list for any tuition policy and make sure you understand it before signing up.
Pre-existing medical or psychological conditions are addressed differently by different plans. There may be an exclusion period involved, or a medical evaluation required prior to coverage.
Should a problem arise near the end of a quarter or semester, keep in mind that it is possible to take incompletes and finish the coursework later (if that is an option for the given condition). Combined with the potential refund through the first few weeks of a semester, tuition insurance is most likely to be used during the middle of a semester.
What if your kids go to a private, tuition-based elementary, middle, or high school? Policies are available for private secondary schools as well. Most of these policies are based on a yearly tuition, as private schools typically charge by the year.
While tuition insurance is useful, it is going to have limits, and for most people it will purely be a peace-of-mind purchase. It is likely to appeal to parents footing the bill at private colleges where the expense and the risk of withdrawal are often higher.
If tuition insurance helps you to sleep at night – and you can afford it after paying all that tuition in the first place – then the cost is worth it to you.