My daughter started at a private school this year. While I wish I could say that we are rich and pretentious, I cannot. My wife and I work in “the city” and live in the suburbs. We wanted to put her in school where we live but we could not get back before 6 p.m. when the after school programs closed. I did have a minor heart attack after calculating the tuition payment, after school care, and extra curricular activities.
Tuition Insurance: Hype or Help?
One of the pamphlets they gave us was for tuition insurance. I remember back in college and grad schools seeing information about tuition insurance, but we were too poor to even consider it. Today, things are different. I work for a bank and know that my job could disappear in a flash. My wife works for a company that focuses on a dying clientele. Needless to say, we think about losing our jobs all the time.
Insurance of any type is great if you use it and a waste of money if you don’t use it. So unless you are getting a rental car and entering it in a demolition derby, you are playing the odds. We knew that one of us losing our job was a very good possibility, so, a deeper look was needed.
At Jacksonville Country Day School, tuition is $11,255 in 2013. Tuition insurance is $313 or 2.8% of the tuition. That is cheap enough, but what about the details. The tuition insurance offered took over your payments if you had to pull out of the school. It did not refund you money already paid to the school. For the benefit to kick in, the child must start attending the school. In most schools, and at JCDS, tuition payments do not start when school starts – they start earlier in the year. Our first payment was due in March and we elected the 10 month payment plan. We pay tuition each month until December.
The percentages change when we take these details in to account. We pay $1,125 each month and our daughter must have been in school for a couple of weeks before the insurance benefit would be offered. The insurance benefit did not refund the entire tuition amount. It paid the remainder of the tuition for the year. In that case, the insurance benefit would only pay for tuition in the months of September, October November, and December – a $4,500 benefit. My tuition insurance now costs me 7% of my total tuition bill. Is tuition insurance worth it?
My decision was Tuition insurance was not worth it. I passed. One of the leading factors in this decision was that we had enough money in our emergency fund to cover the entire year if one of us lost our job. This was also the kick in the pants we needed to beef up our emergency fund.
Questions to Ask – Is Tuition Insurance Worth It
Your situation will be different and your insurance policy will also likely to differ as well. You need to ask yourself these questions to decide if tuition insurance is worth it.
- Does your child have an illness that could cause withdrawal from school? If yes, you want to consider buying tuition insurance. Make sure to check for any pre-existing condition clauses in the policy.
- Do you have a job that could require your family to relocate with short notice? If yes, and your work will not pay for an this lost expense, you should consider buying tuition insurance.
- Is the premium under 5% of the benefit paid out? If no, then I would pass. Anytime you have to pay more than 5% in premiums to get a benefit, I recommend against it.
- Who is the beneficiary? If the benefit is paid, do you get the money or does the school? In my situation, the school would be paid the reminder of the tuition I owed them. I would not get a refund of the tuition I had already paid. This factor changed the premium from under 5% to over 5%.
- Have you reviewed the schools refund policy? If a school offers tuition insurance, odds are they do not have a very generous refund policy. However, ask for the refund policy in any case. Your fears and concerns may be addressed by the school’s policy at no cost to you.
- Can you get the money from somewhere else? If you are worried about losing your job, do you have a large enough in an emergency fund, a UGMA account, or a 529 account (college only)? If you have a parent who is terminally ill, do you have sufficient life insurance. Whenever you can self-insure instead of paying someone else to insure you, I always recommend it.
- Will you lose sleep at night? Let’s face it, some of us just worry and insurance is a great way to calm those worries. If you are the type who will lose sleep over the possibility of not being able to pay your child’s tuition due to unforeseen circumstances, then tuition insurance may be for you.
More information about Tuition Insurance
There are lots of other sources on tuition insurance. Check out these links.
- Fin Aid – http://www.finaid.org/beyond/tuitioninsurance.phtml
- Dewar Insurance – http://www.tuitionrefundplan.com/
- Education Insurance Plans – http://educationinsuranceplans.com/
- Markel Insurance – http://www.markelinsurance.com/Products/AandH/Pages/TuitionRefund.aspx
- BankRate.com – http://www.bankrate.com/finance/insurance/consider-tuition-insurance-1.aspx
- SallieMae – https://www.salliemae.com/insurance/tuition/
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