You insure your car. You insure your home. If you’re Taylor Swift, you even insure your legs (for $40 million!) But most people don’t know you can insure your college tuition, too.
College tuition insurance protects your most important investment — your education. It provides a full or partial refund of tuition, fees, and room and board, if a student withdraws for a covered reason. But what does a “covered reason” mean, and how does tuition insurance work? Let’s take a closer look.
How tuition insurance works
Tuition costs have soared in recent years, primarily because universities are receiving less support from state governments and donors.1 The average annual cost of tuition, fees, room and board ranges from $18,943 at a public four-year university to $42,419 at a private university.2 If a student is forced to withdraw from college during the semester, good luck getting that money back. Most colleges prorate tuition refunds on a sharply declining schedule, so after a few weeks you may receive only a small fraction of your tuition costs.
To protect this significant investment, tuition insurance may be purchased by a student or his or her parents prior to the commencement of college classes. Tuition insurance reimburses some or all college costs, after the college has issued any refunds, if a student withdraws for an unforeseen covered reason.
Those two words — unforeseen and covered — are important. If a student enters the semester expecting or planning to withdraw for some reason, tuition insurance would not cover that planned withdrawal. And every tuition insurance plan has its own list of covered reasons, such as a covered serious injury or the death of a parent or guardian. Tuition insurance is not medical insurance and does not cover medical care.
Once a student withdraws for a covered reason, he or she must get his or her doctor (if applicable) and school administration to fill out the necessary paperwork. When the paperwork is submitted to Allianz Global Assistance and the claim is approved, the tuition reimbursement is paid directly to the policyholder.
What about student loans and financial aid? If a student is paying for tuition using a student loan, he or she is still eligible for insurance and for a tuition refund. If the student is still responsible for paying back the student loan after withdrawing from school, then Allianz Global Assistance’s tuition insurance will refund that amount minus any refunds given by the school. The same applies for any financial aid.
Keep in mind tuition insurance only reimburses the student for costs paid out of pocket. If a student receives a grant that’s paid directly to the school, the student would not be eligible for a refund of that amount.
Different types of tuition insurance
While the concept of tuition insurance is straightforward, every tuition refund plan has its own rules and limitations. That’s why it’s essential to read the fine print. Unlike some other plans, Allianz Global Assistance’s tuition insurance covers a student’s withdrawal due to covered medical or psychological conditions. The Essential plan offers up to a $2,500 payout for withdrawal due to a student’s psychological condition, serious illness, injury or death.
For more protection, the Preferred plan returns up to 100 percent of tuition and other covered college costs if a student suffers a serious covered illness, injury or death, and up to 80 percent if he or she withdraws because of a covered psychological condition. The Advantage plan covers the aforementioned scenarios up to 100 percent, and it also covers withdrawals due to any unforeseen reason at up to 50 percent.
Why do you need tuition insurance?
It’s much more common than you think to drop out of college. Just 55 percent of first-time undergraduates who began college in the fall of 2008 finished their degree within six years.1 If a student suffers a medical or psychological condition that forces her to withdraw from school, she stands to lose a significant portion, if not all, of her tuition, room and board, and other fees. Tuition insurance protects a student for the entire semester.
A 2010 study from the University of Iowa identified emotional/mental health as the top reason for withdrawal from college.2 Recognizing that many students struggle with conditions such as anxiety and depression, all three Allianz Global Assistance’s tuition insurance plans also consider a student’s psychological condition to be a covered reason for withdrawal. Unlike some other tuition refund plans, Allianz Global Assistance tuition insurance also can cover existing medical conditions.
The biggest benefit of a tuition refund plan is peace of mind for parents and students. Tuition insurance reassures parents that their child’s education is protected and they won’t lose a big chunk of the money they’ve saved for college. Students know they can safely withdraw and come home for a while if their college career is derailed by illness, mental health issues or some other covered reason. College is challenging enough without worrying about scenarios like these — that’s why Allianz Global Assistance offers tuition insurance.