Itís long been second nature for people to insure their vehicles, jewelry, furs, boats, etc.; itís only recently that parents started seriously considering insuring their childís education. As tuition rates skyrocket and the economy continues to weaken, obtaining tuition insurance is becoming a much more accepted way for parents to protect their investment.
Tuition refund insurance allows parents to recoup some or all of their money should their child have to leave school prior to completing a semester due to illness or in the case of k-12 schools, if a parent loses a job or has to move.
These policies are offered through schools by third party insurers. The cost of the policy ranges from 1% to 3% of tuition per semester. According to the College Board, the average tuition at a private college is $24,000 which makes the insurance premiums for the tuition refund insurance between $100 and $200 a semester.
There are many private k-12 schools that only allow you to forego insurance if tuition is paid in full at the beginning of the school year. The reason that these schools force you to get tuition insurance is because losing one studentís tuition due to a parentís job loss or insolvency could pose as much of a financial burden to a small private school as it does on the family.
However, when it comes to colleges and universities obtaining tuition refund insurance is voluntary. At the college/university level tuition refund insurance is simply being made available. Most of the time purchasing insurance covering college tuition isnít necessary as most colleges/universities will reimburse all or part of the tuition paid if a student withdraws by a certain deadline, usually within the first several weeks of the semester.
Naturally, the further into the semester you go the smaller the refund. And only certain situations are covered, typically medical or psychological issues that force a relatively small percentage of students to withdraw every year.
There are a few hundred schools that will also refund money for job-loss reasons. According to David Galvin, President of the Education Insurance Plans Insurance Brokerage, more colleges are looking to add that option.
If youíre considering the purchase of tuition refund insurance the first step is to start with the schoolís refund policy and read all of the fine print. Do they offer an insurance option, and if so, what situations are covered? Is the coverage purely voluntary, or is the premium paid for by the school?
Some financial advisors recommend only purchasing a tuition protection plan if there is a medical issue known in advance that might prevent a student from finishing the semester. Itís the same philosophy with a layoff that may be looming at your employer. However, if youíre interested there is still time to purchase tuition refund insurance for the fall. The first day of class usually marks the deadline for adding coverage.