Tuition Insurance Explained

Tuition insurance is a policy that provides reimbursement coverage if a student suddenly withdraws from school for reasons outlined in the policy. Specifically, it could be if they experience medical or mental health issues.

How Tuition Insurance Works

The policy can reimburse up to 100% of your non-refundable cost, depending on the policy. That happens if the student passes away or must leave school for a reason listed in the policy:

  • Tuition expenses
  • Academic fees
  • On-campus or off-campus housing expenses, excluding security deposits

For instance, some policies may pay up to the full amount you lose in non-refundable fees, tuition and housing expenses if the student withdraws due to illness or injury. But they may provide 80% compensation if you leave school early due to a mental health issue.

What Tuition Insurance Covers

Particularly, the policy can cover reasons including:

  • Illness
  • Injury—such as sports injuries and vehicle accidents
  • Student’s death
  • Tuition payer’s death
  • Mental health conditions, such as severe depression or anxiety
Recommended:   IRS Tax Code 7702 Plan | How It Affects Life Insurance Policy

Of course, claims require professional examination before the insurance company will approve them. For claims based on a medical condition, the student must have a doctor’s recommendation to withdraw. Similarly, mental health claims require having a licensed mental health professional examine the student.

Tuition insurance plans also usually cover federally subsidized and unsubsidized loans, non-extendable scholarships and several college savings plans.

They also typically cover physical and mental pre-existing health conditions as long as the student has not received medical care or experienced symptoms of the condition within 120 to 180 days before the first class. However, the timeframe can vary by state.

Also, bear in mind that not all tuition insurance policies provide the same coverage. Another important thing is that you must usually buy tuition insurance before classes begin.

Above all, you should closely examine the terms of the policy before buying it.

Recommended:   A Marijuana User's Guide | How Marijuana Affects Insurance Rates

However, epidemics and pandemics that the World Health Organization and Centers for Disease Control and Prevention recognize are typically not covered by the policy. Although, some plans currently cover Covid-19 related withdrawals.

Other standard exclusions are:

  • Participating in professional sporting events
  • Taking part in a riot or civil disturbance
  • Drug use
  • Activities that involve extreme risks like bungee jumping, skydiving and scuba diving

Is Tuition Insurance Right For You?

If you may lose a lot of money if a college student drops out, then you should consider buying the policy.

Another reason to consider it is if you believe that your health conditions may keep you from completing your stay in school. However, if health is a concern, make sure you understand the pre-existing condition rules of a policy before buying it.

Tuition Insurance Providers

Two national providers of tuition insurance are:

  • GradGuard, which provides insurance underwritten by Allianz Global Assistance, which also sells travel insurance
  • A.W.G. Dewar, which has policies underwritten by Atlantic Specialty Insurance Co., OBI National Insurance Co. and Intact Insurance Co.
Recommended:   How Life Insurance Works During Divorce | Divorce Settlements

Tuition Insurance Cost

Typically, tuition insurance costs about 1% of the total tuition cost. But your premium could double if your school doesn’t participate in a tuition reimbursement plan. Additionally, the amount of coverage you purchase through the policy is flexible.