It’s that the time of year again, when millions of college-bound students and their parents prepare for a semester on campus —many for the first time. Preparations wouldn’t be complete without a busy checklist, which includes buying supplies, new bedding for dorm rooms and even boxes of cookies.
But one item most likely not on the list is tuition insurance. In fact, 86% of parents surveyed by Liberty Mutual Insurance were unaware of tuition insurance and didn’t even know it existed, let alone what the insurance covered.
Tuition insurance reimburses people who pay for higher education in circumstances where unexpected occurrences force a student to withdraw from school. For example, if a student develops a serious medical condition like mono or obtains a physical injury requiring surgery and time away from school, tuition insurance would cover the expense.
“The idea is if the unexpected thing does happen to you then you will be covered,” Paul Richardson, the managing director for tuition insurance for Liberty Mutual Insurance, told Yahoo Finance’s On The Move. “Instead of having to pay for four years of college if you’re out of school and you’re outside of that refund policy, all of a sudden you’re on the hook for four and a half-years of school because you’re not getting that semester’s tuition and room and board and fees back.”
Richardson said the insurance is essential for parents worried about getting the most out of their tuition costs in case of an emergency. Tuition insurance policies, which cost 1% of tuition, cover families for reimbursement even when the insurance has not been fully paid off. It also provides refunds regardless of the source, such as student loan or scholarship. Some colleges and universities offer tuition insurance policies of their own. While Liberty Mutual partners with some schools, it also provide direct-to-consumer insurance policies.
Be aware of tuition refund policies
One of the main issues causing some families to struggle after unforeseen instances force their kids to withdraw from school, is a lack of knowledge about school’s tuition return policy. Many institutions offer little-to-no reimbursement at all. Liberty Mutual found that 63% of the parents polled do not know what their child’s college or university refund policy is or if their school offers one.
“It’s a sliding scale that starts probably at 100% within the first week so if you have to withdraw then you’ll probably be OK [and] get all of your money back,” Richardson said. “But after the third or fourth week, parents are often surprised to hear that they’re gonna get nothing back.”
Marabia Smith is a producer for Yahoo Finance On the Move.