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Tuition Refund Insurance
Tuition refund insurance, also referred to as tuition insurance,
provides coverage in case a child is forced to withdraw from school
for medical or other reasons. Tuition refund insurance also provides
coverage in case the parents are forced to relocate by their employer
in the middle of the academic year.
Most private schools do not offer refunds when a student withdraws in the middle of the school year. If a family is concerned about the possibility of a mid-year withdrawal, they should obtain tuition refund insurance.
Tuition refund insurance is sponsored through third-party insurers. (A handful of colleges also offer tuition refund insurance.)
Pre-existing Condition Exclusions
Tuition refund insurance is generally not recommended except when the student has a serious illness that may force the student to withdraw from school. However, tuition refund insurance plans may include a preexisting condition exclusion of 6 months to a year that can preclude coverage in such situations. Some plans will waive the preexisting condition exclusion after 6-12 months of coverage. Since most teenagers are healthy, tuition insurance is often not financially worthwhile, but does provide peace of mind.
Because of the peace of mind benefit, tuition refund insurance is more likely to be of interest to parents whose children are attending more expensive schools and who are paying most of the cost out of pocket.
Most tuition refund insurance programs will provide coverage for medically necessary withdrawals due to illness or injury, death of the student or death of the parent or guardian. Some will provide coverage for involuntary job loss or relocation, mental health withdrawals, voluntary withdrawal and dismissal or suspension for academic or disciplinary reasons.
For coverage in the event of the death of a parent or guardian, it is usually better to obtain term life and disability insurance coverage sufficient to replace the wage-earner's income plus private school and college costs.
Be sure to ask whether the coverage is full or partial. The coverage may involve coinsurance where the tuition refund will be reduced by a percentage, typically 10% to 40%. In most cases coverage for death or medically necessary withdrawals is 100% (mental health is 60%). But in all cases the benefit is reduced by the amount of any refund from the school.
Also ask about exclusions. Many plans exclude suicide or intentional self-injury, injuries from participation in protests and demonstrations, and withdrawals due to the use of controlled substances or alcohol abuse.
Tuition refund insurance typically costs 1% to 5% of the face value of the coverage per year, ranging from $100 to $1,000 depending on the school's tuition costs and claim history.
Companies offering Tuition Refund Insurance
Tuition refund insurance policies are offered through selected private schools. In most cases parents will apply for protection through the private school, as opposed to contacting these companies directly.
"To give away money is an easy matter ... and in any man's power. But to decide to whom to give it, and how large and when, for what purpose and how, is neither in every man's power nor an easy matter."
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