Personal Finance

Learn How College Tuition Insurance Works Before Buying A Policy

While most people are familiar with products like homeowners’ insurance, car insurance, and life insurance, you can insure pretty much anything you want these days. In fact, it’s not all that uncommon for regular people to buy wedding insurance due to the high costs of getting hitched. You can also buy insurance for a boat or a jet ski you own, or for a specific part of your body.

But that’s not all. A newer insurance product called college tuition insurance is growing in popularity, and it’s easy to see why. The fact is college tuition and fees seem to increase with each passing year. It makes sense for families to want some financial protection just in case something goes wrong, and their dependents have to pause their studies for a limited time or even withdraw altogether.

Like it or not, your college or university is unlikely to grant you a partial refund if your dependent is in a car wreck and misses six months of college to recover, or if a mental health condition requires taking a semester off.

But does college tuition assistance make sense for the bulk of students? And does the actual coverage you can buy live up to the hype?

College Tuition Insurance: How It Works

Tuition insurance is designed to cover time off from college for unforeseen, covered accidents and other covered reasons. Instances that may be covered by these policies include:

  • Covered serious illness or injury (such as mononucleosis, Covid-19, or a severe head injury as examples)
  • Chronic illness (examples include an auto-immune disorder or diabetes)
  • Mental health conditions (including stress, depression, or severe anxiety)

Tuition insurance can also reimburse you for more than just educational expenses paid to your school.

To find out how tuition insurance works in the real world, you can take a look at one of the popular providers. Insurance policies offered through GradGuard promise financial protection in scenarios where you cannot maximize the higher education experience you paid for.

Specifically, GradGuard says its policies cover tuition and other fees as well as prepaid expenses for room and board.

While this is a dark and dreary topic, plans from GradGuard also cover the death of a student or the death of the person paying tuition. Finally, these plans come with a 24-hour hotline that provides assistance to students and their families in the event of an emergency.

How Much Does College Tuition Assistance Cost?

GradGuard makes it easy to get a free quote for its plans, which is a major plus. You don’t even have to list a bunch of personal information to get an idea of the pricing. However, you should note that tuition insurance costs vary based on the cost of tuition at your college or university and how much coverage you want overall.

As an example, a quote for a student living on-campus at University of California-San Diego and the annual plan cost was $574 for the following benefits:

  • Injury/illness coverage up to 100%
  • Death of a student or tuition payer up to 100%
  • Mental health condition coverage up to 100%
  • $1,000 in coverage for other school expenses
  • 24-hour hotline support

However, this quote was based on having annual coverage up to $28,000, and the costs go up and down from there as you adjust the specifics. For example, having tuition insurance worth up to $50,000 per year would require an annual premium of $945, whereas having just $10,000 in coverage could cost as little as $189.

Should You Buy College Tuition Insurance?

Knowing the costs of tuition insurance can help you decide if it’s worth it for you, but there are other considerations to keep in mind. For example, what are the chances of your dependent (or even you) being unable to finish a semester of school before it’s time to pay for the next one?

Financial advisor Joseph Carpenito of Materetsky Financial Group says he thinks tuition insurance is always “worth considering,” but that it can be especially valuable for families who want to safeguard a significant financial investment in their child’s education.

“It’s especially beneficial for students attending expensive colleges or universities where recovering the tuition costs might be challenging,” he added. “Additionally, students with health issues or engaging in high-risk activities might find tuition insurance helpful in protecting their education from unforeseen interruptions.”

Higher education expert Kate Colbert, author of Commencement: The Beginning of a New Era in Higher Education, notes she was once in a situation where tuition insurance could have benefitted her immensely.

When Colbert was an undergraduate student in the 1990s, she was diagnosed with early-stage ovarian cancer and told she needed surgery as soon as possible. This was in the middle of a college semester, she said, and her university had a “no leave of absence” policy that wouldn’t let her take the time off without losing her initial investment and having to pay for the same courses a second time.

Colbert says her family could not afford to pay any more for school than they already were, so she put surgery off and stayed in school seven more weeks to finish out the semester.

“It was a risky gamble,” she said. It’s also one she may not have had to take if she had tuition insurance ahead of time.

Colbert pointed out that more and more schools are offering reasonable leave of absence policies these days, and these policies are making it easier for students to take time off when they have to. However, she also says tuition insurance may be worth considering if you or your student have a dynamic disability or an illness that is progressive or unpredictable.

“Certainly, investing $300 in a policy to ensure you don’t lose $30,000 in tuition can provide meaningful peace of mind,” she said.

The Bottom Line

You should absolutely have homeowners’ insurance (or renters’ insurance), coverage for your car and a life insurance policy to protect against your untimely death, but should you get tuition insurance? At the end of the day, the decision to buy one of these policies (or not) is entirely up to you.

Either way, now is a good time to determine what the leave of absence policy is for the school you or your loved one is planning to attend. You can also find out what happens to prepaid college tuition and fees if a sudden illness or injury means a partial or full semester of payments winds up going to waste.

If you’re staring down the prospect of paying $10,000 or more for a year of higher education, forking over a few hundred bucks to protect your investment may not seem like a big deal.

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