Insurance agents working with parents of new college students may do well to pitch a new policy to them: so-called “dropout” insurance.
Increasingly appealing to parents, tuition insurance provides a reimbursement in the student decides to leave school before the end of the year. And with the cost of a private four-year university education now averaging $42,000 a year – and dropout rates at more than 15% - it’s easy to understand why.
“Amongst other friends who have kids in college, a lot of us, you know, would talk about this tuition insurance,” said Patrice Rosati, an Oklahoma mother preparing to put three sons through college.
The policies, offered by groups like AWG Dewar and Markel through GradGuard, range in cost from less than $300 a year to more than $600, depending on tuition costs. The coverage kicks in when students withdraw due to medical or mental health issues, though many policies contain exclusions related to parent job loss, academic disciplinary issues and alcohol or drug abuse.
When claims are validated, the product reimburses tuition, room, board and fees – in short, anything a college or university won’t refund if a student fails to complete the semester.
And since 76% of respondents to a survey conducted by
Allianz – another insurer offering tuition insurance – say they were unaware that post-secondary tuition might not be refundable, it is worth agents starting a conversation with clients.
Joe Mason, chief US marketing officer for Allianz said the policies are becoming increasingly popular with parents of all students.
“We discovered that there were a couple of startling statistics that a lot of parents were surprised about,” Mason said. “We’ve had interest from Ivy Leagues all the way down to community colleges.”
