When you purchase large ticket items, such as a home or a vehicle, it makes sense to purchase insurance to cover those investments. After all, it can be quite difficult to replace them should anything go wrong. Given that logic, wouldn’t it also be wise to seek out insurance to protect your educational investment, too? The answer may not be as simple as it seems. Unlike your home and vehicle that are at risk from outside forces, such as thieves or bad drivers, your education is not usually in danger from anyone other than yourself. Unfortunately, there are things that could derail your plans. A prolonged illness or death in the family could force you to take a leave of absence or withdrawal altogether. Depending on your school’s policy, that could mean taking a hit to your bank account, too. If it’s early in the semester, you have a better shot at getting reimbursed, but after the withdrawal date, it can be nearly impossible. Before you decide if tuition insurance is right for you, here are some things to consider.
What is Covered?
Most tuition insurance plans are offered through your college or a group plan. In general, they cover the loss of tuition, fees, and room and board that are not reimbursed by your college or university. Most will pay benefits to you if you need to leave school for one if the following reasons:
- Death of a Parent
- Death of a Payer
- Death of the student
- Medical Disability (accident, physical injury or illness)
Most policies will also cover medical disabilities due to mental, nervous or emotional disorders, though a two-day minimum hospital stay is typically required. Pre-exitsing conditions, however, are less likely to be covered. Some plans even offer additional benefits, such as identity theft protection, repair or replacement coverage for your computer, and emergency travel assistance. Keep in mind that not all covered instances are paid out at 100 percent. Some conditions, such as mental health problems, may only reimburse as little as 60 percent. The terms and conditions vary by insurance carrier and school, so be sure to read the fine print before signing up for any coverage.
What Isn’t Covered?
If you leave voluntarily because you are homesick or stressed over academics, tuition insurance will typically not cover your losses. You will also lose your benefits if you withdraw because of illegal activities, drug use, or self-inflicted injury. Here are some additional instances that may not be covered:
- Failure to attend classes
- Early graduation
- Military draft
- Change in enrollment status from full-time to part-time student
- Dismissal due to academic or disciplinary reasons
How Much Will it Cost?
Rates for tuition insurance vary by institution, but you can expect to pay several hundred dollars for coverage. For policies purchased through a college or university, expect to pay your premium at the beginning of each semester (usually by the first day of class) or forfeit coverage for that term. If you purchase a membership with College Parents of America ($199), you’ll automatically receive $5,000 in tuition refund insurance as a benefit, regardless of when you enroll. In most cases, the price is contingent on the cost of attendance and how much the policy will cover. Unlike car insurance or renter’s insurance, where you can shop around and find the best price, your options for tuition insurance are usually limited to what is offered by your college or university.
Will You Use It?
The short answer to this is probably not. In 2010, the Wall Street Journal did a piece on tuition insurance and found that most colleges had very few claims each year. For example, New York University, which is one of the most expensive colleges in the U.S., had between 10 and 20 claims per year. That amounted to approximately two percent of those who had elected to take out tuition insurance. Unless you have an unusually low tolerance for germs or general bad luck when it comes to accidents, you’ll probably never need to file a claim.
Of course, you don’t buy home owner’s insurance or car insurance expecting to use it either; it’s basically there to give you peace of mind. The same could be said for tuition insurance. The chances are slim to none that you’ll actually need it, but if you would feel better having a safety net, it might be worth it. Your college degree is one of the biggest investments you will ever make, so take the time to research your options and weigh the benefits before deciding if it’s right for you.