Is Tuition Insurance Worth the Money?

moneyWe insure our cars, our houses, and sometimes even our pets. So, why not insure tuition? For a few hundred dollars, parents can purchase insurance for their child’s tuition in the event they drop of out college for medical reasons. With parents gawking at the semester’s $25,000 tuition bill, it’s no wonder some are considering tuition insurance. It has other parents, however, wondering if those extra hundred dollars are worth it, considering that bank-breaking tuition money they are already struggling to come up with.

The largest tuition insurance provider, A.W.G. Dewar, a unit of OneBeacon Insurance Group Ltd., said that insuring a child’s education is a solid investment. Providing plans for more than 1,000 of the U.S.’s priciest, private schools and elite colleges, Dewar often sends out insurance brochures to families when it comes time for parents to pay for tuition.

It’s unlikely, however, that one of these policies will do a parent any good. New York University reports that 10 to 20 claims are made a year, which is less than 2 percent of those insured, while the University of Southern California says that less than 1 percent of those who buy tuition insurance, about 50 to 60 claims a year, actually benefit from their policy.

These policies offer full coverage, but only under the right circumstances. For medical reasons, such as a bad car wreck or a debilitating case of mononucleosis, the insurance will reimburse parents 100 percent of the tuition paid, but will only cover 60 to 75 percent if students leave for mental-health problems. Self-inflicted wounds and drug addiction are not covered. The policy may also exclude preexisting conditions and mental-health issues that would only land a student in the hospital for a couple of days.

Robert Hunter, director of insurance at the Consumer Federation of America said that parents should ask themselves if tuition insurance is worth the money for their own specific circumstances. What are you afraid of happening to your child? Would it be a huge financial strain for you to pay the insurance? Hunter said everyone should ask these types of questions whenever purchasing insurance.

“I don’t think it’s a great economic value,” Hunter said, “but if you are so worried about it that you’re not sleeping at night, you should get it.”

Via The Wall Street Journal

Also read:

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Tuition Free Colleges: Higher Education’s Best Kept Secret?

Second Semester Tuition Payments Hurt Struggling Families

One Response to “Is Tuition Insurance Worth the Money?”

  1. Grad Guard says:

    Most of the discussion including today’s article in the Wall Street Journal incorrectly focus on the Dewars plan which is only offered to the 170 or so elite colleges which is not relevant to a majority of colleges in the nation. In reality the discussion should have included GradGuard- the only national tuition insurance program available to all students studying both in the US and on Study Abroad programs

    Before GradGuard, most students never had the opportunity to even buy tuition insurance. Many families are not even aware that it is even possible to protect their families from the potential loss that can occur from an unexpected illness, accident, injury or even death. Moreover, most families and students are unaware of the real risks and problems that can interrupt a college education.

    Before forming an opinion on if tuition insurance is good or bad, recognize that the risks are real. The ACHA- National College Student Health Trends Fall 2009 Study demonstrate just a few of these risks:

    1) within the last 12 months, 1,165,000 or 12.9% of students have been diagnosed or treated for problems with depression and/or anxiety.

    2) within the last 12 months, 479,000 or 5.3% of students stated that the death of a friend or a family member had a negative impact on their academic life.

    3) within the last 12 months, 144,000 or 1.6% of students were diagnosed or treated for mononucleosis.

    Exact numbers on medical withdrawals from college are difficult to obtain. But clearly they do occur and more than 1.5 million students will experience one of just three examples of incidents that could qualify for a medical withdrawal. A 2009 Student Monitor study found that 27% of students either themselves experienced or had a close friend who experienced a mid-semester withdrawal from college due to student medical condition or a death in their immediate family.

    Only it’s not just that college “can be” expensive, it is expensive, very expensive indeed. And the risk of losing money when a medical withdrawal occurs is very real, with rare chance for a successful appeal. College Parents of America recently conducted a survey of 215 colleges and universities across the country. Of the 215 schools researched, 181 (84%) have strict refund schedules for medical withdrawal, without a refund appeal mechanism with most not refunding any tuition after the 4th week of class. The other 16% of schools surveyed do have an appeals process for students who are looking for a larger refund.

    Now with a threat of losing money invested on college – from tuition, fees, books and even room and board, this real, you might wonder why you would invest in a college education without some insurance to protect the investment. We protect our homes, our automobiles, our health and even our travel – so tuition insurance is a product that is now not only necessary but also available to all students and their families.

    GradGuard exists in part, to make sure that the risks facing college students do not interfere or disrupt the pursuit of a college education. GradGuard’s tuition insurance helps address one of the major reasons a student might not complete school which is due to financial loss associated with the death of the tuition payer, a catastrophic medical problem, or a mental health problem.

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