Many parents think that tuition insurance is a waste of money or that they really don’t need it. I suppose that if you happen to be fabulously wealthy, losing $30,000 or $40,000 because your child has to withdraw from her private school might not be a big deal. But for the rest of us, that's real money.
Here’s why you are required to take out tuition insurance. When you sign the contract with the school, you are responsible for the annual tuition, room and board charges for the academic year. The school will have operating expenses which it must honor regardless of whether your child completes the full year or has to withdraw after the second month.
To protect themselves most schools offer you two options: you can pay the entire year’s tuition, room, and board in one payment by July 15; if you opt to pay in two installments or in monthly payments, then you will be required to purchase tuition insurance. The school has to know that the fees on which it is counting to balance its budget will indeed be there. Regardless of whether or not your child is at school or has withdrawn.
Here is how one tuition insurance provider explains the concept:
"The cost of a private school education is a substantial investment. The Tuition Refund Plan provides insurance to protect your investment. Because student withdrawals are sometimes unavoidable, the Tuition Refund Plan is a welcome resource for families who must commit to a full annual tuition by signing a contract with the school.
In the event of a covered withdrawal or dismissal, payments made by the Plan can assist in fulfilling contracted tuition payments."
Currently, 1300 of the leading independent schools and colleges in the nation offer our Plan to families in order to provide comprehensive coverage, low cost rates and important consumer protection."
This short video explains how tuition refund insurance works. While the speaker is discussing tuition refund insurance for college, it works the same for private schools. With a boarding school education costing $40,000, $50,000 or more, you can easily understand why tuition refund insurance is required.
What does tuition insurance cost? Typically you will pay .009% to 1% of the face value of the education charges. As noted above tuition insurance is mandatory unless you pay in one payment up front.
Tuition insurance affords protection and peace of mind for both parents and the school. The school knows that its income is assured. You know that you are protected in the event that your child is forced to withdraw from the school. There are several reasons why that might be necessary.
Here is how another provider explains their product:
"Student withdrawals can be a problem for private schools, colleges, and universities. Many tuition contracts obligate parents for full or partial tuition costs whether the student completes a full term or not. Tuition paid in advance may be refunded, or unpaid tuition obligation canceled, resulting in the institution suffering a loss of planned revenue.
In addition, strict adherence to this policy may place the institution in an awkward position as student withdrawals are often occasioned by family hardship.
Tuition Protector is an insurance program that protects schools' revenues and eliminates the financial burden families face when students are forced to withdraw prior to term completion."
Illness or injury
The last thing any of us parents want is for something to happen to our darlings. All of us in our quiet reflective times breathe a sigh of relief that we have gotten thus far without serious accident or injury to our children. But the reality is that the unexpected can and does happen. God forbid that anything should happen to your child which requires her to withdraw from school due to illness or injury. Extended medical treatment and therapies can take months. Your child will be out of school. With tuition insurance, when the unexpected happens, at least you won’t be on the hook for the balance of the year’s school expenses.
This video explains why you need to have tuition insurance for financial protection. The video discusses tuition insurance for colleges, but the same warnings apply to private K-12 school tuition insurance.
Insurance is always protection against terrible events such as tornadoes, floods and other disasters. If your child is expelled from private school, your tuition insurance will pay most of the balance of the year’s expenses. Perhaps you are thinking that the school has no right to expel your child. What about due process? Can’t we tie things up for months with hearings and appeals? If you believe that you can do that, please read the fine print in the contract which you and the school signed. Consult with your attorney if you don’t believe what you are reading. There are no students’ rights here. You and your child are governed by contract law. The obligations of all parties are clearly spelled out in the contract which you signed. If your child breaks the rules, there will be consequences.
Death in the family
Another unexpected event which can and does happen is the death of a parent. If that were to happen in the middle of the school year, and circumstances forced you to withdraw your child, your obligation to the school would be taken care of by the mandatory tuition insurance.
This kind of unexpected event is usually tied to a parent’s career. Suddenly there it is: the offer from your wife’s firm for her to head the London office. Are you going to turn an offer like that down? Of course not. After all the firm is giving your spouse the full expat package which includes private school education for your children at an American school during your time abroad. But what are you going to do about the last four months at Shady Valley Country Day School? You are going to withdraw your children and make the move knowing that your tuition insurance will cover the balance of the year’s school’s expenses.
The precise benefits of each school’s tuition insurance are spelled out in your tuition insurance contract. Read it carefully. If, for some reason, it does not cover unexpected events such as I have described above, then ask your family insurance agent to quote you coverage. The old adage: “Better safe than sorry” applies.
Here is an explanation of how another provider's plan works:
"The Tuition Refund Plan program reimburses covered tuition at a selected benefit level when a withdrawal or dismissal results from a covered cause of loss.
Covered Benefits Include:
- Medical Withdrawals
- Mental Health Withdrawals
- Medical Absence
- Death of the Student
- Death of the Parent
- Family Relocation
- Voluntary Withdrawal
- Dismissal of the Student
Ask about tuition insurance. Understand what is covered and what is not covered. Your school's business office will have the answers which you need.
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