We buy insurance for things like homes, cars, our health, weddings, and more; but have you thought about buying college tuition insurance?
With the pandemic ongoing and the average cost of college room, board, and tuition in the USA at about $25,000 a year, a four-year university trip can cost a huge amount of money.
It was a good idea to protect your university tuition payments with tuition insurance prior to the pandemic, right now it is more important than ever before. Let’s see how tuition insurance works and if you should buy it before heading off to school this year.
Tuition Insurance Explained
Tuition insurance, like other types of insurance, is a policy you can purchase that will refund your university costs should you need to withdraw from school due to an unexpected medical event or other situation covered by the insurance policy. Most institutions of learning offer total or partial tuition refunds based on their own policies, but tuition insurance takes it a step further.
The insurance works like so, you pay a monthly premium for the insurance policy which covers a set amount of tuition reimbursement. If you are forced to withdrawal from school before it has begun, then your policy will protect your tuition payments. Because the common official withdrawal date from classes is 5 weeks into the semester, many universities have their own prorating system for students who must leave within that 5-week period.
The insurance can cover things like tuition, room, board, books, and other miscellaneous expenses.
What is Covered with Tuition Insurance?
Like other types of insurance, there are different levels of coverage. Usually, a policy will cost about 1% of your total tuition and the amount of insurance coverage you can purchase can vary (think car insurance deductible flexibility as an example). Depending on your level of coverage you can cover more or less of certain areas.
When is Tuition Insurance Used?
What qualifies as an “unexpected” event which leads to a school withdrawal that can kick in a tuition insurance policy? You will want to look at the specific wording of any policy you may be considering, but usually, an unexpected “event” is something along these lines:
- Injury (major injuries which prevent a student from attending class)
- Illness (chronic or serious illness which prevents a student from attending class)
- Depression, anxiety, substance abuse, other mental health disorders.
But be careful as pre-existing medical conditions may not be covered if the student was deemed unable to start the semester before it began.
“Illness or injury” also goes beyond physical illnesses and can encompass mental health, substance abuse, or other psychological issues. Considering the high stress of attending university courses, the ongoing pandemic, and personal stress associated with finding your place in the world; it is important to take into considering the mental health component of any tuition insurance policy.
Does Tuition Insurance Cover Covid-19 Closures?
Right now, this is the million-dollar question.
“What if my school closes or partially closes due to a coronavirus outbreak, does my tuition insurance policy kick in then?”
Considering the large number of people who purchased tuition insurance because of the ongoing pandemic, the question is legitimate. So, how does Covid-19 play into this? Unfortunately, tuition insurance coverage only kicks in from a total withdrawal from school. If your campus has been closed and you are sent home to take your classes online, you will not be able to make a tuition insurance claim as technically you are still attending school.
So, online schooling is not something that will get your tuition money back. You may be able to file a claim if you are forced to leave school due to complications following a coronavirus diagnosis where you cannot take classes or complete course work. But tuition insurance won’t payout for your school going to online classes.
What if I’m Getting Financial Aid?
Whether you are getting financial aid, a student loan, or some other form of tuition plan (grants, 529 plan, etc) – tuition coverage is determined based on the amount purchased on the policy. Because a tuition insurance claim payout goes to the insured and not the student loan provider, you can still get tuition insurance if you’re on financial aid.
But remember that it will not cover the costs of any interest or penalties for late payments. If you have a private student loan that is already accruing interest, that interest can continue to accrue even if you’ve made a claim and been paid out from your tuition insurance policy. So, this is something to be very aware of.
Do I Really Need Tuition Insurance?
No matter what the tuition cost of your learning institution, you should make the decision to buy tuition insurance based on your current financial situation. Since most individuals and families may not be able to afford an additional semester of school, tuition insurance is smart.
Consider that if you must leave school for at least one semester, you’ll need to add an additional semester in order to finish. So, if those additional costs (room, board, tuition, books, etc.) will be not possible or exceedingly difficult for you financially, it’s smart to purchase tuition insurance to protect your time and financial investment.
We recommend it.