Is Tuition Insurance Ever Worth the Money?

tuition insurance

As tuition continues to rise across many colleges, parents and prospective students stand to pay a hefty price for a college education.

According to College Board, the average cost of in-state tuition at a public university is $9,650. For out-of-state, that number jumps to $24,930. And if you went to a private school? The cost goes up even more.

Paying so much money or taking on student loans is an investment in the future. But with so many variables in life, you may be looking into ways to protect your investment. One way to do that? Through tuition insurance.

What is tuition insurance?

Tuition insurance, which is also commonly referred to as tuition refund insurance, provides a safety net of coverage for students in the event that they must withdraw from school, typically for medical or mental health reasons.

Let’s say a student experiences a life-changing illness or accident and is unable to continue with their schooling. Under a tuition insurance plan, that student may qualify for a reimbursement of school-related expenses to help cover costs.

This can ensure that whatever money has gone toward school is recouped in the event a student can’t continue.

What is covered?

Tuition refund insurance varies by plan, but typically only covers certain qualified events. So if a student drops out just because they’re no longer interested in pursuing their education, they likely won’t be qualified for a tuition reimbursement.

In order to qualify for a tuition insurance reimbursement, students typically must have a qualifying medical event.

As you can imagine, there are many medical events that could result in a withdrawal from school. According to Allianz, a provider of tuition insurance, depending on the type of plan students can receive some tuition reimbursement for the following reasons:

  • Illness or injury
  • In the case of death
  • Mental or psychological disorders (such as severe depression and anxiety, etc.)
  • Any unexpected reason

Your overall reimbursement depends on the type of policy you get and the reason for withdrawal. For example, you may get a certain percentage of qualifying losses based on the price of tuition and room and board, as well as other fees.

In many cases, a tuition refund insurance reimbursement for mental health pays out less than what you may qualify for a physical injury or illness.

How much you pay for tuition insurance can vary by state, which provider you choose to go with, and how much coverage you’d like. A quote from Allianz in the state of California, with $40,000 of projected college expenses, offers these options:

Tuition insurance isn’t terribly expensive for a policy and it could be worth it to protect your investment. But depending on your situation, a college tuition insurance plan may not be worth the cost.

Who should get tuition insurance?

If you’re thinking of getting a college tuition insurance plan, you may be wondering if it’s the right fit for your situation. While a tuition insurance plan can provide much-needed peace of mind if anything happens, you may not need it.

Getting a tuition insurance plan is typically a good idea if the student has a prior medical history, or if you or your child are attending an expensive college and the peace of mind will ease some of your worries.

However, as with any contract, it’s important to read the fine print. Some tuition insurance plans may have pre-existing medical condition exclusions. Some plans may only cover partial tuition or have high deductibles.

If you do opt for a plan, you want to make sure to read the fine print and know exactly what type of plan you are getting and what the tuition insurance plan covers — and most importantly, what it doesn’t.

Is tuition insurance worth the cost?

Many experts agree that tuition insurance simply isn’t worth the cost. While it may provide some peace of mind for those “what if” situations, it typically doesn’t have a high return on investment — either because you (hopefully) never need to use it or it only covers a portion of your expenses.

If potential illness is a concern, one thing students and parents can do is look into any refund policies at their schools. Your school may or may not provide such a policy, but it doesn’t hurt to ask. Also, if you withdraw within the first few weeks of school, you may be able to recoup some of your costs.

If you’re a parent or soon-to-be student, think carefully before opting for tuition insurance. If you have reason to believe it will be of benefit, it could help, but in many cases it may just be an added expense.

Interested in refinancing student loans?

Here are the top 6 lenders of 2018!
LenderRates (APR)Eligible Degrees 
Check out the testimonials and our in-depth reviews!
2.58% - 7.25%Undergrad
& Graduate
Visit SoFi
2.99% - 6.99%Undergrad
& Graduate
Visit Laurel Road
2.57% - 6.32%Undergrad
& Graduate
Visit Earnest
2.57% - 7.25%Undergrad
& Graduate
Visit CommonBond
2.56% - 7.82%Undergrad
& Graduate
Visit Lendkey
3.11% - 8.46%Undergrad
& Graduate
Visit Citizens
Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

Published in Insurance

  • Max Power

    Just looking at the figures, I think its quite expensive. I realize illness and “mental disorder” is covered, but wouldn’t it make more sense to take out a larger life insurance policy for the $540 or $2400? If someone were to fall seriously ill there is deferment for later completion and I am sure they make it difficult to collect on “mental illness” because everyone in this country is or can feign mentally ill to some degree.

    “This can ensure that whatever money has gone toward school is recouped in the event a student can’t continue.”

    Here’s another thought, let’s say I have a child at school who develops cancer and requires chemotherapy who subsequently withdraws for a year at a 20K debt load. Does this policy pay out the 20K and then my child returns with a clean slate and gets to keep the 60cr previously earned? Seems too good to be true, I see this policy as you are permanently damaged in some way and will never return to your studies so it erases your debt load. This is something I would want to clarify.