Before Jackie Niblock sent her only son Ryan off to Virginia Tech this month, she made sure he had all of the snacks and comfy sheets he needed to feel at home in Blacksburg. And for her own comfort, she took out a $50,000 insurance policy that would reimburse Ryan’s college costs if he had to withdraw from school.

For $146.43, Niblock purchased a one-semester policy from Allianz Global Assistance that covers up to 100 percent of tuition and housing costs if Ryan suffers a serious illness, injury or death, and up to 80 percent if he leaves school because of a mental health condition.

“You plan for college from the time they’re little, so the last thing that you want is for something to go wrong and not have that investment protected,” said Niblock, who lives in Richmond.

No family wants to envision a child withdrawing from school, but with a year at most four-year universities costing at least $13,000, some parents are planning ahead. And international insurers like Allianz are taking notice. The company is selling tuition policies in 10 states, including Virginia, North Carolina and New Jersey, joining a small but growing list of insurers providing this specialty coverage.

“We’re talking about an investment that in many cases is second only to someone’s home,” said Joseph Mason, chief marketing officer at Allianz Global Assistance, the U.S. arm of the German insurer. “You can protect the investment you have in your home or your car…this just makes sense.”

But given all the college expenses families have to cover, some experts are skeptical that the tuition policies are worth the cost.

“The plans are providing you with some reassurance that you’re going to get your money back, but the reality is they come with enough restrictions that you’re not really getting much of a financial benefit,” said Mark Kantrowitz, publisher of, a college planning Web site.

Most plans refund a portion of tuition and on-campus housing when a student withdraws at any time during a semester for medical reasons or mental health problems, according to the Insurance Information Institute.

But policies often exclude pre-existing conditions and will not pay out in cases of self-inflicted injury, drug use or expulsion. And while insurers generally offer full reimbursement for medical withdrawal, most only provide a partial refund for mental health-related withdrawals.

In the case of Allianz, the company provides 100 percent coverage up to $50,000 for mental health conditions, illness or death for families who purchase its top-tier plan at a cost of 6 percent of the total cost of tuition, fees, room and board for the semester. Keep in mind that the student has to be hospitalized for two consecutive days to qualify for coverage under that plan.

The plan also refunds 50 percent of the total costs if a student leaves school for any unforeseen reason (barring drug use and expulsion), a feature that is not available for the other two tuition plans offered by Allianz. At a cost of $29.95 a semester, parents can get minimum coverage that pays out up to $2,500. For more coverage, the company offers a plan that pays out up to $50,000 at a cost of 1.35 percent of total costs for a semester. 

Niblock said she found the mid-tier plan most appealing when first learned about the insurance at a health expo at Virginia Tech. Before then, she hadn’t really thought much about what would happen if her son got sick and had to leave school. But after talking to a school nurse about a mononucleosis outbreak last year, Niblock figured some precaution was in order. After all, a year at Virginia Tech cost about $20,000 for in-state students like Ryan.

“I have every confidence that he’ll just love it, do fine and sail through,” Niblock said. “But you expect the best and plan for the worse.”

Allianz will roll out its plans across the country by next year, Mason said. Policies are only available per semester, which means parents have to purchase two policies to cover a full year of school. Although the plans are only offered in 10 states right now, parents can use them for any school in the country. Policies must be purchased before the start of the semester.

Tuition insurance is not exactly new. A.W.G Dewar, an arm of One Beacon Insurance Group,  started providing coverage in 1930 through private primary and secondary schools, expanding to colleges in 1985. Dewar, which now offers plans at more than 150 colleges, remains the largest player in a market that includes Sallie Mae and Markel Insurance. There are no industry numbers on how many families purchase the coverage. 

For the most part, colleges themselves will reimburse a portion of tuition and housing costs if the student drops out within the first few weeks of school. Most policies, including the ones offered by Allianz, cover whatever portion of the total costs the school will not refund.

At Virginia Tech, for instance, a student who leaves for medical reasons will only be charged for the days enrolled. But if that student withdraws after the seventh week of the semester, the parents would be on the hook for the full cost of room and board. Virginia Tech spokesman Mark Owczarski said the school considers exception on a case by-case basis.

Families are often clueless about college refund policies, said William Suneson, co-founder of Next Generation Insurance Group, which offers Gradguard tuition plans underwritten by Markel. The company said its survey of university administrators found that while school policies are usually disclosed on their websites, few go out of their way to discuss the terms with parents.

“It’s important that families become aware and schools let them know what level of reimbursement if available,” Suneson said. “If a school doesn’t offer 100 percent refunds, families should have the opportunity to insure the risk.”

He said his company has sold thousands of Gradguard tuition policies since the plans were first introduced in 2010. While Suneson did not provide the exact percentage customers who have filed claims, he said the company has a 60 percent target for its loss ratio, which measures the percentage of insurance premiums that insurers devote to claims. Some years are higher than 60 percent, others are lower, he said.

While Kantrowitz of does not recommend tuition policies for most families, he said they may be useful for families taking out a private student loan from a lender that will not discharge the debt in the event of death or disability. Only four private student loan providers — Sallie Mae, Wells Fargo, Discover and New York Higher Education Services Corp. — will cancel a borrower’s debt in cases of permanent disability.

Even in that case, Kantrowitz recommends families get term life insurance with a face value equal to amount borrowed and a term equal to the repayment term.

“Because your child is young the costs of those policies are relatively low, whereas [tuition] policies can be pretty high as a percentage of tuition,” Kantrowitz said.

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