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Is Tuition Insurance Worth It?

December 02, 2020 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Is Tuition Insurance Worth It?

College is one of the biggest expenses parents will have for their children. The fact that undergraduate costs at public institutions have risen over 30% within 10 years puts many parents in panic mode.

To add to the concerns: What happens if your student gets sick or injured and is unable to attend classes for a semester or longer?

What if, heaven forbid, your child dies while enrolled? Will the college reimburse you? Not necessarily. There is, however, a product that can mitigate the risk of your student being unable to attend college courses: tuition insurance.

Tuition insurance might be worth it for some but not all families.

What Is Tuition Insurance?

Just as you have health insurance to cover costs associated with unexpected health issues, you can get tuition insurance to cover college tuition costs in the event of unexpected health issues that prevent your student from attending, or death.

Also called tuition refund insurance, it can recoup some or all of what you’ve paid in tuition if your student experiences a serious covered injury or illness that prevents college attendance.

What Does Tuition Insurance Cover?

Generally, tuition insurance covers:

•   Serious sickness
•   Injury
•   Mental health conditions, including anxiety and depression
•   Death of the student or person paying tuition

You’ll need to read the fine print to find out what qualifying medical events are, as some policies will list specific illnesses like mononucleosis.

Imagine a pandemic sweeping the land (wild thought, huh?). Tuition insurance will not cover tuition if a college or university has to close or if your student simply isn’t comfortable attending class in person, but if your student contracts the disease and is unable to attend classes as a result, you may be eligible for a partial refund of tuition for that semester.

To file a claim, the student must withdraw from school, and a medical professional must document that withdrawal was necessary. The process can vary by policy, though. (More on this later.)

It’s important to know what tuition insurance does not cover as well. If your student leaves college for academic reasons or is on disciplinary probation, you will not be reimbursed for tuition.

Some preexisting conditions may not be covered, so if your student has a medical condition, make sure it is covered before buying the policy.

Tuition insurance may also not cover participating in professional sports or extreme sports (like bungee jumping), participating in a riot, drug abuse, suicide, or self-inflicted injury.

Who Should Consider Tuition Insurance?

Some students or parents paying for tuition might be better candidates for college tuition insurance than others.

For students with preexisting conditions that can be covered by a policy, it can be a good idea to purchase coverage, especially if it’s a condition that is known to keep the student bedridden or otherwise unable to function for weeks or months at a time. The reimbursed tuition money could be put toward medical bills.

If you have more than one child in college, a tuition insurance policy could help you recoup costs for a student experiencing an issue that you could then put toward other college expenses.

And if the school your student is attending is very expensive, an insurance policy may allow you to relax more.

Let’s Talk Costs

Part of determining whether college tuition insurance is worthwhile is understanding the policy cost vs. possible reimbursement, as well as tuition costs.

While a select few schools offer free tuition, most have significant price tags. During the 2020-21 academic year, these were the average costs of tuition and fees:

•   In-state tuition for a four-year public university: $10,560
•   Out-of-state tuition for four-year public university: $27,000
•   Private nonprofit four-year institution: $37,650

These numbers add up over four (or more!) years, so it’s understandable that paying for an insurance policy might make sense. But how much is tuition insurance?

Plans vary in pricing and features, but generally, you can expect to pay about 1% of tuition cost. Some cover other expenses like room and board, while others do not.

Buying a Tuition Insurance Policy

Currently, there are two primary providers of tuition insurance: GradGuard and Liberty Mutual . Some schools may work with a private insurance company, so start by asking the registrar’s office if the college has a partner for tuition insurance.

The most affordable and comprehensive coverage can be obtained by going through the school, John Fees, co-founder of GradGuard, has said.

To enroll in a policy, you’ll be asked your student’s school and costs for a semester of tuition. GradGuard will also ask for costs of room and board and associated expenses.

Liberty Mutual will ask if your student will be studying abroad the semester you seek coverage, as that is covered with the policy. GradGuard does not cover a student studying abroad.

You’ll be given a quote, and if you want the coverage, you can purchase from there by adding a few more personal details and payment information. You’ll pay your monthly premium, just as you do with auto or health insurance.

Reading the Fine Print

Before purchasing the policy, it’s best to read the fine print. The last thing you want is to purchase a policy and file a claim, expecting to be fully reimbursed, only to find out the condition you’re filing for isn’t covered.

For example, GradGuard’s fine print discusses a preexisting medical condition exclusion waiver. It states that preexisting medical conditions are covered when the insured student does not have symptoms of the condition on the policy purchase date and was medically able to attend school, or if the student was covered by a similar policy by the same company within four months of the effective date of the current policy.

Other fine print items to note are whether a doctor or licensed mental health professional needs to diagnose the student with the medical condition to qualify for reimbursement, the effective date of the policy, and how to prove your loss. Not all policies will fully reimburse your tuition or other costs, so find out how much you may be eligible to be refunded before purchasing a policy.

How to File a Claim

Each insurance company has its own process for filing a claim. Be sure to read through the process, as one incorrect step could cause your claim to be denied.

GradGuard requires you to call to file your claim, while Liberty Mutual allows you to do so online.

You’ll need documentation for the expenses you want to claim from the college or university. You may need the registrar’s office to verify on paper that your student has withdrawn for the semester, as well as documents showing what you have paid in tuition and expenses.

You may also need a written order from your student’s doctor or mental health professional stating that your child is unable to attend school due to medical reasons. For mental health issues, hospitalization of 24 to 48 hours may be required.

Alternatives to Tuition Insurance

While tuition insurance can come in handy if medical conditions or injury force a student to withdraw, the college might offer full or partial reimbursement without insurance.

Policies vary from one school to another, so inquire with the college or university before assuming you can get expenses refunded.

Some schools will refund tuition, but only during the first five weeks of a semester. Others won’t reimburse tuition but will refund some or all of room and board expenses if students withdraw.

Is Tuition Insurance Right for You?

The bottom line: If you don’t like taking risks with your money and are concerned that your student might have a situation that results in withdrawal from school for one or more semesters, tuition insurance could be a worthwhile investment. It’s a low expense compared with tuition, it could be well worth it should you end up filing a claim.

If your student has a preexisting condition that would be covered, insurance could mitigate your risk of losing money should that medical condition cause a need to leave school. On the other hand, much is not covered in terms of preexisting conditions or activities your child might be involved in, like professional sports. In these cases, the policy would be moot if the condition isn’t covered when you file a claim.

If a student withdraws, and not all costs are covered or if no policy is in place, a private student loan could be a solution to fill the financial gap. SoFi offers private student loans with flexible terms and no fees. The money can typically be used for tuition, books, room and board, transportation, and personal expenses.

Check your rate for a private student loan from SoFi in just three minutes.



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