What Is Tuition Insurance and How Does It Work?

College is a major financial commitment, with average annual tuition costs ranging from $11,950 at public in-state colleges to $45,000 at private schools. 

Unfortunately, if you must withdraw halfway through the semester, you could lose a significant amount of money, depending on your school's refund policies. 

A tuition insurance plan could protect your investment if you leave school for a covered reason, such as illness or injury. But what is tuition insurance exactly? 

This guide explains how tuition insurance works, including its pros and cons, so you can decide whether a plan would be useful for you and your family. 

Current private student loan rates

What is tuition insurance?

Tuition insurance reimburses you if you must withdraw from college for a covered reason. It typically covers tuition, fees, and room and board, up to a certain amount depending on your plan's limits. Tuition insurance is optional — it's up to you whether it's worthwhile.  

This may depend on your school's policies.

Some colleges offer refunds if you need to withdraw, but policies vary by school. In many cases, you only get a reduced amount back if the semester has already started. Tufts University, for example, offers a 100% refund if you withdraw in your first week, but only a 60% refund after week four and 0% back after day 42. 

With tuition refund insurance, you could recoup 100% of your costs even if you withdraw later in the year. However, you typically must purchase an insurance plan before classes start to get coverage. 

What does tuition insurance cover?

While the details of college tuition protection plans differ, many offer coverage for: 

• Medical issues, such as injury, illness, and autoimmune disorders  
• Mental health conditions, such as depression and anxiety 
• The death of the person paying your tuition 

If you are considering purchasing a policy, you should read over the fine print of any tuition insurance plan to see what's covered and what's not. Generally, you can expect to be covered if you need to take time off due to unforeseen accidents or illnesses. 

As for covered costs, an insurance plan may refund your tuition, fees, and room and board. However, it typically won't cover books or supplies.

“The coverage included in tuition reimbursement plans really depends on the policy,” says Cathy Mueller, executive director of Mapping Your Future, a nonprofit organization that helps students, families, and schools navigate higher education financing. “Some plans just cover tuition, while other policies may cover the fees as well as residence hall and meal plan costs.”

Tuition insurance coverage might also include a 24/7 hotline for emergency assistance.  Part of this assistance may include travel arrangements for parents to visit their child in the hospital or transportation if the student needs help getting home.

What does tuition insurance not cover?

Tuition insurance won't cover you in every situation. You probably won't get a refund if you leave school due to academic failure or voluntary withdrawal. The plan also may not cover emergencies that come up due to extreme sports or drug use. 

Some plans may also not cover issues related to pre-existing medical conditions. If this is important to you, read over the details before choosing an insurance provider.

How much does tuition insurance cost?

The cost of tuition insurance will vary depending on the plan and provider you choose, but it often ranges from around 1% to 2% of your tuition. For example, Virginia Commonwealth University advises students that tuition insurance is available to them at a cost of 1.8%. 

Here are some examples of what you might expect to pay for a tuition insurance plan:

Is tuition insurance worth it?

Tuition insurance can provide financial protection if you unexpectedly have to withdraw from school, but it's not necessary for everyone. Considering these benefits and drawbacks can help guide your decision: 

Pros

• Financial protection: Tuition insurance can reimburse up to 100% of tuition, fees, room, and board if you withdraw from school due to a covered reason. This might help you get your money back and avoid unnecessary student loan debt. 
• Supplement your school's policy: Some schools only refund a small percentage of your investment (if any) if you withdraw after a few weeks into the semester. Tuition insurance can provide full reimbursement if you need it. 
• Peace of mind: College costs can be high, so you might feel more secure knowing that you'll get your money back if the unexpected happens. 

Cons

• Coverage restrictions: Tuition insurance won't reimburse you if you leave school due to poor grades or withdraw voluntarily. Plus, some plans don't cover pre-existing conditions or require a waiver to do so. 
• Extra cost: College is already pricey, so you may not want to add another expense on top of tuition, fees, supplies, and living costs.
• Not always necessary: If your college already has a generous refund policy, tuition insurance might not be worth the cost. Check your school's guidelines before you purchase a plan. 

Ideally, you'll never need to use your tuition insurance, but you might decide it's worth the cost if the unexpected happens. This is especially true if you're attending a high-cost private school with a restrictive refund policy. Students with a history of medical conditions may also opt for a plan that covers pre-existing conditions in case their health prevents them from completing the semester.

Brian Safdari, CEO and founder of College Planning Experts, doesn't think tuition insurance is necessary for most families. However, he says it might be worth reviewing for students at high risk of not completing a semester. 

“My recommendation is to look at the probability of using tuition insurance due to your child’s circumstances, then look at the cost to buy the premium,” says Safdari. “If the college does not offer any refunds, it may be worth purchasing.”

Where can you buy tuition insurance?

Many colleges and universities partner with insurance companies to provide their students with tuition insurance. For example, your school might direct you to a plan offered by GradGuard, A.W.G. Dewar, or Protect My Tuition.

If you'd like to purchase a plan on your own, your primary option is GradGuard. GradGuard offers quotes on its website, so you can compare plans and pricing. It also partners with more than 600 colleges and universities, so check with your school to see about your options.