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Should You Buy Tuition Refund Insurance?

Not all insurance policies are created equally, and not all things need to be insured in this day and age, yet you can get a policy for just about anything. One type of policy that has been around for some time, but with very little fanfare is Tuition Refund Insurance (also known as Tuition Insurance).

Find out now: What will it cost to go to school?

This type of policy does not cover a parent if little Jimmy spends too much time at the frat house, or if Susie gets bored and drops out. Tuition refund insurance is a policy that provides coverage in the instance that medical reasons force a student to withdraw from school. Sickness, injury from accidents and even mental health issues (though this may only be covered at sixty percent) can be covered by these policies. Some policies even cover the death or loss of a job by a parent.

On the surface, this type of policy may seem like a good thing if the student has a history of medical issues. In many cases however, these policies have a pre-existing condition clause that could exclude covering the possible return of a past illness.

Please be aware that any intentionally self-inflicted injuries (including suicide) are not covered. If your child becomes an activist and is injured during a protest or demonstration, that is also not covered, as well as issues from alcohol or drug abuse.

Based on the current price of tuition, room and board for college, the price of these policies does not seem so bad. It can run anywhere from one to five percent of the value of the coverage you seek.

Does this make sense to you? Maybe. In general, young adults in their late teens and early twenties are relatively healthy. Statistically speaking, the chances of your child getting sick to the point of school withdrawal are usually minimal. A term-life insurance policy can help cover either the parent for lost wages or the student for paid tuition at a lesser cost and with fewer restrictions.

One thing to look into before buying such a policy is to find out what type of refund you may be eligible for from the school itself. While in many cases, the refund is negotiable, most schools do provide a sliding scale that covers the first four to six weeks of any semester.

Tuition refund insurance can be purchased directly from the university (not available at all schools), or through a third party insurance company. There is one company that offers a group policy. For all members of the non-profit advocacy group College Parents of America, GradGuard automatically enrolls the student in this plan. It also offers such protection plans as identity theft, small gadget theft, and both computer repair and virus protection. These parents get coverage of $5,000 and can purchase up to $50,000 in increments of $5,000.

Many parents will say that what they pay for tuition is already more than they can deal with, and adding an insurance policy, for even the smallest chance of having to use it, just isn’t worth it. For others, this policy is all about being able to sleep at night. Chances are, if their child gets sick or if something else happens to them, it will be a nightmare they will have to live through. They me need the money from that insurance policy to help offset those medical bills that will come.

There is no right or wrong answer here. What makes sense for one family might not be applicable for another. Being informed will make all the difference in the world though.

Photo Credit: purplemattfish

Victor Alfieri Victor Alfieri is a freelance writer who covers a variety of personal finance topics for SmartAsset. Victor is an expert in housing markets, insurance and credit.
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