Is Tuition Insurance Worth It?

What is tuition insurance, and is it worth it? There’s no single answer that’s right for all students. Buying tuition insurance can add to the already high cost of college. On the other hand, it can protect you financially should you find yourself in a position where you need to withdraw from school but your school doesn’t offer refunds.

What Is Tuition Insurance?

Tuition insurance is a specific type of insurance that’s designed to cover education-related expenses in case of emergency circumstances. It is also known as tuition refund insurance.

For the purpose of tuition insurance, emergency circumstances include any situation that results in the student having to withdraw from school unexpectedly in the middle of the academic semester. This includes if the student experiences medical or mental health issues, is seriously injured, or has some other emergency.

Colleges in general have very strict policies about refunding tuition fees if a student drops out, regardless of the reason behind the withdrawal. A few colleges may reimburse a small fraction of the total cost of attending, while others may have a zero-refund policy.

Even with colleges that do reimburse, it is usually on a declining schedule. That means it depends on the time of withdrawal. If the student drops out at the beginning of the academic year, the college may refund a portion of the tuition, fees, room, and other expenses. However, if the student drops out later in the academic year, the school may not offer any compensation at all.

This is where tuition insurance could potentially be worth it as it protects you financially by ensuring that you get reimbursed. It reduces the risk if you are forced to withdraw from school due to debilitating circumstances. Receiving some amount of compensation can be especially helpful for reducing your total student loan debt.

How Does Tuition Insurance Work?

Every tuition insurance policy has different coverage policies. Generally, to qualify for reimbursement, the illness or injury must be considered incapacitating, leaving the student unable to continue their academic pursuits. If your reason for withdrawing from school meets the terms outlined in your policy, tuition insurance will reimburse all qualifying expenses.

Qualifying expenses that may be covered generally include:

  • tuition and school fees
  • the cost of on-campus or off-campus housing.
  • federally subsidized and unsubsidized student loans
  • non-extendable scholarships and
  • 529 college savings plans

Security deposits are usually not included in the coverage. Most tuition insurance policies reimburse up to 100% of a student’s non-refundable fees, tuition, and housing expenses if the student withdraws due to incapacitating illness or injury or if the student passes away. If a student withdraws from school early due to issues related to mental health, the compensation could be less than 100%.

What Does Tuition Insurance Cover?

Tuition insurance coverage varies widely from one policy to another. Most providers cover these reasons for withdrawing:

  • A life-altering illness or injury
  • Debilitating mental health issues such as severe anxiety or depression
  • A chronic disability, illness, or injury
  • Student’s death
  • A death in the family

To qualify for medical reimbursement due to an illness or injury, the student must submit a letter from their doctor recommending that they withdraw from school. To qualify for reimbursement due to mental health issues, the student will need to submit supporting documentation by a licensed mental health professional.

In addition to unforeseen illness or injury, few insurance providers also cover certain chronic or preexisting physical and mental health issues, provided they meet certain guidelines.

It’s important to note that all policies do not provide the same coverage. Before buying tuition insurance, it is important to understand what is and what isn’t covered.

What Does Tuition Insurance NOT Cover?

Tuition insurance will not reimburse students who choose to withdraw from school for any reason not listed in their coverage terms. For example, they will not compensate a student who decides to drop out because they are struggling academically.

Almost every tuition insurance policy will have these standard exclusions:

  • Injuries sustained from participating in professional sporting events
  • Injuries sustained from participating in extreme-risk activities such as skydiving, bungee jumping, or scuba diving
  • Injuries or illness stemming from drug use
  • Taking part in a riot or civil disturbance

After the Covid-19 pandemic, almost all providers have excluded Who-recognized epidemics and pandemics from tuition insurance coverage.

How Much Does it Cost?

The cost of tuition insurance varies considerably from one provider to another depending on your college costs. In general, you can expect to pay about 1% of the total cost of tuition toward tuition insurance. For example, the premium for $25,000 in coverage to match the annual cost of tuition, will be around $250.

The premium tends to be lower if your college provides its own tuition insurance or participates in a tuition reimbursement plan with a third-party provider. On the other hand, expect to pay more if your college does not provide its own tuition insurance, nor does it participate in a tuition reimbursement plan. Purchasing insurance directly from a third-party provider can be pricey.

Most tuition insurance policies offer some flexibility in terms of the amount of coverage you can buy. You can choose to insure the full tuition amount for the semester or quarter or only a portion of the tuition.

Policy durations also vary among providers. The majority of policies cover the duration of the current academic semester or quarter. In this case, the policy will need to be renewed every subsequent semester or quarter for the student to continue being covered. It’s very rare for tuition insurance to cover the full academic year.

So, Is Tuition Insurance Worth It?

We’ve covered how tuition insurance works, what it covers and what it doesn’t, and how much it costs. But back to the main question, is tuition worth it for you? How do you determine whether or not it is worth it for you? There are a few things you can consider in making this decision.

It may be worth it for you if you have a pre-existing condition or are at high risk for a health condition but your college doesn’t have a medical withdrawal policy. You may also need tuition insurance if your college offers medical withdrawal reimbursement but the coverage does not meet your anticipated needs. If you’re not sure about your school’s coverage policy related to certain conditions, you can get all the clarifications you need from the financial aid office or the registrar’s office.

If you’ve determined that tuition insurance is worth it for you, here are a few important things you need to know.

8 Important Considerations for Purchasing Tuition Insurance

Tuition insurance is easy to purchase. All you need to do is fill out and submit an application form and pay the premium. This can save you thousands of dollars in case of valid circumstances that force you to withdraw from college.

But it also costs money to get that protection. Before you buy tuition insurance, it helps to do in-depth research on your school’s refund policy, insurance coverage policies, and the cost of insurance. The worst thing is to buy insurance only to find that you are not entitled to a refund because of something you overlooked.

Here are 8 important things you should know before You purchase:

  1. You may not need to do a medical exam or submit medical certificates to buy tuition insurance. However, you will need both to support your withdrawal from school and qualify for reimbursement.
  2. You must buy tuition insurance before classes start. It’s more difficult to find suitable policies after classes start.
  3. Buying directly from private third-party insurers is more expensive. Before you choose this option, check with your school if they’ve partnered with a tuition insurance provider. This is usually the less expensive option.
  4. When deciding how much coverage you need, take into consideration your tuition fees and the cost of room and board, as well as non-refundable expenses for books, parking, student activities, and parking.
  5. In case of withdrawal, the amount you receive as reimbursement will depend on the terms and conditions of your policy. Make sure to read through your policy coverage details to understand how your withdrawal reimbursement will be calculated.
  6. When you withdraw impacts how much you receive as reimbursement. You’ll receive a larger percentage if you withdraw earlier in the semester rather than toward the end of the semester.
  7. Remember, tuition insurance is not a ‘drop out’ insurance. No policy will cover you for dropping out because you cannot handle the coursework. If you find yourself struggling and want to drop out, consider taking a lighter course load instead. This is a far better alternative to dropping out and losing all the money you’ve paid toward tuition.
  8. Most plans will pay out if the payer, a parent, or any other person, passes away and the student has to withdraw under these circumstances. Some also cover other unforeseen reasons such as the involuntary unemployment of the person paying the college tuition.

Tuition Insurance Is Worth it If…

If you have health concerns and believe that there’s a high likelihood that they may force you to withdraw from school in the middle of a semester, it’s smart to consider tuition insurance. Speak to your school’s registration office or financial aid office to find out details about their refund policy.

Last but not least, if you do decide to go ahead and purchase tuition insurance, make sure to read through the policy details thoroughly to understand exactly what’s covered and what’s not covered.

College tuition is expensive but scholarships and grants can help. College Raptor’s free Scholarship Search Tool makes it easy for you to find grants, scholarships, and institutional aid suited just for you.

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