Is Getting Tuition Insurance Worth The Cost?

Michael Hanson/Getty Images

If you are planning to attend college soon or have a family member who is, you may be considering tuition insurance. This is a type of insurance coverage that refunds students a portion of their education expenses if they have to drop out due to an emergency, such as injury or illness.

While tuition insurance could save you thousands of dollars in an emergency situation, it is not always necessary and may not be worth it for everyone. Many colleges offer leave policies with similar guidelines. Ultimately, it is important to research all of your options and find out your school’s policy before making any decisions.

What is college tuition insurance?

College tuition insurance, also known as tuition refund insurance, covers tuition and qualifying expenses in the case of an emergency situation that results in an unexpected withdrawal during an academic semester.

While every policy will have different regulations — the illness, accident or emergency generally must be considered debilitating and render the student unable to continue with their studies. In some cases, chronic or preexisting conditions may be eligible for coverage, in addition to unforeseen illness and injury.

What tuition insurance covers

The specifics of tuition insurance coverage vary by the provider and your school. However, most providers cover tuition, room and board and fees after:

• A death in the family.
• A life-altering illness or injury.
• A chronic illness, disability or injury.
• A debilitating mental health condition or illness.

In the wake of the COVID-19 pandemic, providers are also starting to offer pandemic or epidemic coverage. GradGuard, a prominent tuition insurance company, includes COVID-19 coverage on all plans purchased on or after Feb. 18, 2022.

How much tuition insurance costs

On average, tuition insurance costs roughly 1 percent of your total tuition costs, according to the National Association of Insurance Commissioners (NAIC). However, the amount of coverage is flexible.

Depending on the policy, some providers may allow you to cover a portion of your tuition. However, most cover the costs per academic semester and require you to renew your coverage each semester.

When is college tuition insurance worth it?

It’s not uncommon for students to withdraw from college for a semester or longer due to health challenges. Because of this, many schools have safeguards in place that allow students to do so without an additional charge, at least for the first few weeks of school.

If your school has clear refund policies for withdrawals, tuition insurance ultimately may not make sense. The biggest risk is withdrawing near the end of the semester, when schools may be more reluctant to offer even partial refunds.

You may find that college tuition protection is worth it if your school doesn’t offer a medical withdrawal refund or if it doesn’t cover your anticipated needs. For instance, if you have a preexisting mental health condition and your school does not cover it in its refund policy, you may consider tuition insurance.

If you can’t find the information you need or if the details are murky, contact the office of financial aid or the registrar’s office. They may be able to provide more information so you can determine next steps.

Bottom line

College tuition insurance can save you thousands of dollars in the event that you withdraw, but tuition protection is only worth it after you’ve done the proper research on your school’s policy and see if insurance fits your school budget if you need it. Otherwise, you’re wasting money on coverage that you’re given for free by your school.

If you do feel that tuition refund insurance is necessary, be sure to compare policies and carefully review the terms to ensure that you are covered for any emergencies you are likely to have.

Frequently asked questions

• Is tuition insurance mandatory?
  

  No, tuition insurance is not mandatory. It is optional coverage you can purchase to protect you in specific instances where you may have to withdraw from school early. However, it is important to first check your school’s policies to ensure that there is not a refund policy already in place.

• Is tuition insurance a qualified 529 expense?
  

  No, tuition insurance is not a qualified 529 expense. According to the IRS, qualified 529 expenses include tuition, fees and books. It also includes room and board at an eligible educational institution.

• What does tuition insurance for private schools typically cover?
  

  Tuition insurance for private schools generally includes a death in the family, medical emergencies and a serious health or mental illness. However, policies can vary based on provider, so be sure to carefully review and compare policies to find the best insurance plan for your needs.

• What if I face extreme hardship and still have student loans?
  

  There are currently federal programs that can provide assistance in the event of death or disability if you have federal student loans. Some private student loan lenders, such as College Ave, also provide hardship assistance to borrowers.