Protect Yourself with Insurance for College Tuition?

By Michael Schramm, University of Michigan
Have you ever been fearful that an injury mid-semester would leave you unable to attend classes — thereby making you incur that semester’s costs for nothing? Well, Allianz Global Assistance is attempting to alleviate that concern with tuition insurance.
This summer, the company has launched a program in which students can insure their college tuition in case of injury, illness, death and, in some cases, unforeseeable circumstances.
Joe Mason — USA Chief Marketing Officer at Allianz Global Assistance — says that the insurance company is “filling a real need in the market that parents have and students have.”
These need comes during a relatively tumultuous time for college costs. The amount of student debt is currently over 1.2 trillion dollars and increasing at a rate of $3,055 a second, according to Marketwatch.
Additionally, Four-Year Myth, a study done by Complete College America, reveals that only 19% of 4-year bachelor’s students graduate on time. Additionally, even when examining flagship or particularly research-based schools, only 36% graduate within a four-year frame. This raises the question as to whether a large chunk of students aren’t graduating on time due to taking time off for unforeseen reasons, at least for Mason.
While the idea of tuition insurance isn’t an entirely new concept, Mason says that the company got the idea through examining high tuition and low timely graduation rates. Through talking to parents, he says there’s a concern about the “skyrocketing cost of tuition” and whether their child will graduate and find a job.
According to a survey done by the company, 50% of parents with college-bound high-school students would buy the insurance if offered.
The company produced a survey that validated some of their concerns. 84% of parents think the cost of tuition is too high, and 81% of parents were not aware that tuition insurance existed.
“Many parents and students aren’t aware that it exists,” says Mason. “we protect the non-refundable expense for tuition, room, and board that a parent or child would incur in the event that they have to withdraw from the school.”
The company does this through providing three different insurance plans.
The essential plan costs a flat rate of $29.95 and covers $2,500 related to a student’s illness, injury, death, psychological or mental disorder.
According to Mason, the preferred plan costs 1.35% of the amount insured taken out (e.g. $270 for a $20,000 tuition plan) and will pay 100% of the covered amount for illness and injury while paying 80% for a psychological or mental disorder.
The Advantage plan costs 6% of the insured amount taken out, and it pays 100% for illness, injury, death and psychological or mental disorder. The plan also includes 50% for “Any Unforseen Reason.”