After buying a home and saving for retirement, paying for college is one of the largest financial commitments a parent will make.
With the average cost of tuition, fees, and room and board rising to roughly $21,000 a year for a state school and about $47,000 at a private university, you might be tempted to protect your money.
One way to do that is through tuition insurance. Haven’t heard of tuition insurance? You’re not alone.
WHAT IS TUITION INSURANCE?
Tuition insurance protects your money if your student must withdraw from school before the end of a semester. Most policies only cover withdrawal for a severe health issue, such as mononucleosis or an unexpected accident.
So if your student drops out for academic reasons or is not happy at school and quits, the insurance won’t apply.
How much you pay for tuition insurance varies by state, insurance provider, and the type and amount of coverage. Most insurers say the cost of a policy is roughly 1% of the cost of tuition.
IS TUITION INSURANCE WORTH IT?
To decide if tuition insurance works for you, the first thing to do is understand how the coverage works, so read the fine print.
In order to collect on the insurance, you’ll need to document all claimed expenses and have a doctor’s recommendation that your child takes a break from college.
Also, be sure you understand the refund policy at your son or daughter’s university. Many colleges will refund some or all of tuition if your child withdraws for any reason before a specific date in the semester.
If you’re a parent of a soon-to-be student, think carefully about tuition insurance. While a tuition insurance policy can provide peace of mind for a “what if” scenario, it might not be right for your situation.
Photo credit: cdrin / Shutterstock.com