How to Decide if Tuition Insurance Is Worth It

According to the College Board, the average cost of tuition and fees for public, four-year, in-state universities was $10,560 in 2019-2020. Out-of-state students paid far more at $27,020 per year while private university students paid an average of $37,650.

Many families feel that these financial sacrifices are worth it provided the student earns college credits in return. But what about students who need to withdraw from class early due to an unexpected illness or injury? If the school won’t issue a tuition refund, all of that money could go to waste.

Some parents and students might worry about unexpected school withdrawals even more right now due to the coronavirus pandemic. With tuition insurance, however, there’s a strong chance that families could recover the cost and protect your investment.

Here’s what you need to know about tuition insurance to decide if it’s worth it for you.

What is tuition insurance?

Tuition insurance (sometimes called tuition refund insurance) promises to provide tuition reimbursement if you can’t finish your academic term for reasons that are covered by the policy.

Although many schools have a tuition refund policy, some don’t. And, for those that do, you might only receive 100% of tuition money back if you withdraw by the school’s drop/add date.

After that time, the amount often diminishes each week until students become ineligible for any refund whatsoever. According to GradGuard, the vast majority of schools won’t issue any refunds after the fourth week of the semester.

But with tuition insurance, students might get reimbursed for not only their tuition but also mandatory fees, and room and board. Most tuition insurance policies require that students purchase coverage before the first day of the semester and will honor claims up to the last day of the semester.

Thousands of schools offer tuition insurance to their students. Although some students might choose to self-insure, most partner with a third-party provider, like GradGuard or A.W.G. Dewar. Students can also buy policies directly from third-party sellers.

What does it cover?

The list of covered events for a tuition insurance policy might include:

• Significant injury or illness
• Chronic illness
• Mental health conditions
• Death of the student or the student’s parent
• Other major unexpected events

The main idea behind tuition insurance is that it’s meant to cover unforeseen events. Pre-existing medical conditions might also not be included.  However, you might be partially or completely covered for things like unexpected moves or dismissal from the school.

It should be noted that even if the insured person used student loans to pay for their education costs, they can still make a claim on their insurance policy

Know that some schools might reduce the maximum benefit for certain covered events. For example, tuition insurance might pay 100% for illness or injuries, but only 60% for mental health conditions.

Does tuition insurance cover COVID-19?

Most tuition insurance policies exclude epidemics and pandemics from their list of covered events. However, some insurers have announced exceptions for COVID-19.

If you’ve tested positive for the virus and feel that you need to withdraw from your classes, you might be eligible for reimbursement. Check with your insurer to see if they’ve published a COVID-19 policy.

But insurers aren’t likely to cut students a check who withdrew from school because they’re afraid of catching COVID-19 or don’t want to deal with the inconvenience of online classes. Make sure you have proof that you have, in fact, contracted the novel coronavirus if you’re planning to make that claim.

How much does tuition insurance cost?

Tuition insurance is fairly inexpensive. According to the National Association of Insurance Commissioners, the average price is about 1% of your tuition costs.

So if the total cost of your semester’s tuition, fees, and room and board is $10,000, you could expect to pay around $100 for tuition insurance. But students with $20,000 in per-semester education costs could pay $200 or more.

Unlike ongoing insurance products (like home or auto insurance) you can only make a tuition insurance claim once per semester. For this reason, you shouldn’t have to pay a deductible before your insurance kicks in if you need to make a claim.

Related: Student loan insurance: Do you need it?

Tuition insurance pros and cons

Here are the biggest pros and cons of tuition insurance to consider.

Pros

• Affordable pricing. The average cost of a tuition insurance policy is about 1% of a student’s tuition costs and there are typically no deductibles.
• No time limit on coverage. Most policies reimburse students for covered events all the way up to the last day of the insured semester.
• Covers more than tuition. Tuition insurance plans typically cover school fees, and room and board cost as well.

Cons

• Pre-existing conditions might not be covered. Unless the insured student had no symptoms before taking out the policy, a withdrawal caused by a pre-existing condition might be ineligible for reimbursement.
• Some covered events might get lower payouts. Plans might pay less than 100% for withdrawals due to mental health conditions or non-medical events.

How to decide if you should get tuition insurance

With an average price of 1% of your tuition cost, buying tuition insurance shouldn’t break the bank. But that doesn’t necessarily mean that every student should buy it. Let’s take a look at a couple of sample scenarios.

Let’s say you’re an in-state Florida State University student. FSU won’t typically issue refunds after the fourth week, but it makes exceptions for a serious student illness or death. In this case, it might not make sense to buy tuition insurance as you’d already be covered for many of the events that tuition insurance is designed to protect against.

However, New York University (NYU) doesn’t mention any exclusions to its normal refund schedule for injury or illness. Plus, its estimated annual tuition and fees are north of $70,000 compared to just over $18,000 for resident FSU students. In other words, you’re putting a lot more money at stake. So for NYU students, buying tuition insurance could make more sense.

As these examples show, whether someone should get tuition insurance really depends on their specific circumstances. To decide if it’s worth it for you, consider your school’s tuition prices and refund policy, in addition to your own financial situation.

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