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Tuition Insurance

Last Updated 9/22/2021

Issue: Tuition Insurance, also known as tuition refund insurance, is insurance that provides coverage if a student faces circumstances where they need to suddenly withdraw from school, most often for medical or mental health reasons, although there are policies available that offer broader coverage. 
Tuition insurance can be obtained from an insurance provider, educational institutions, or even as part of a student loan. These policies will refund some or all of the tuition expenses and typically other incidentals, like room and board, if the student withdrawals from school for a covered reason.

Background: Simply put, tuition insurance offers a way for college students to recover the cost of paid tuition, fees, room, board, and other eligible education expenses in the event the student unexpectedly withdraws from school, typically due to a serious physical or mental illness. A recent College Board report noted a moderate college budget for an in-state public college for the 2020-2021 academic year averaged $26,820. A moderate budget at a private college averaged $54,880. Most universities have their own refund policy on a declining schedule, offering some level of reimbursement if a student withdraws within the first few weeks of the semester. However, if a student drops out late in the semester, they may only get a small fraction of their tuition or nothing at all. 

Although the concept of tuition insurance seems straightforward, every tuition refund plan has its own rules and limitations for coverage.  Overall reimbursement depends on the type of policy purchased and the reason for withdrawal.  Tuition insurance policies typically require the circumstances for withdrawal are unforeseen.  Most tuition plans cover students who have a life-changing illness or accident and are unable to continue with their education.  Pre-existing medical conditions may be eligible for coverage. 

For example, Allianz Global Assistance, which distributes its tuition product through GradGuard, offers several levels of plans that may provide reimbursement of tuition, room and board, and certain other fees for a student who must withdraw from school due to a covered reason such as:

  • Illness or injury
  • Death of the student
  • Death of the tuition payer
  • Mental health condition (such as severe depression, anxiety, etc.)
  • An unforeseeable reason

However, not all plans or carriers offer the same covered reasons, and some plans or carriers may reduce or eliminate benefits for certain losses, such as if the student leaves school because of a mental illness.  Additionally, terms, conditions, and exclusions apply to all plans so prospective buyers should  be sure to review any plan to understand the levels of coverage available. 

Epidemics and pandemics are excluded from tuition insurance. However, some insurers have been flexible with this policy during the coronavirus pandemic and have covered students who needed to withdraw during the Spring 2020 semester due to contracting the virus.  Students would not be reimbursed for leaving school due to fear of falling ill with the virus.

On average, tuition insurance costs about 1% of the total tuition cost.  Also, the amount of coverage purchased is flexible, depending on individual needs and circumstances.  For example, students could choose to insure a portion of their tuition or the entire amount for the semester.  A policy typically covers the length of the current academic semester and needs to be renewed each subsequent semester for coverage to remain in effect.

Additional Resources

Tuition Insurance Rescues Lost College Deposits and Payments (June 2020, Forbes)

Should You Buy College Tuition Insurance? 
August 2021, Consumer Reports

Why Tuition Insurance is Necessary 
April 2020, Private School Review

 

 

Contacts

Media queries should be directed to the NAIC Communications Division at 816-783-8909 or news@naic.org.

NAIC Center for Insurance Policy and Research (CIPR)

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