Tuition insurance may be required or optional. In either case, it is designed to: (a) protect the school’s revenue stream and (b) protect the family against financial obligations should a withdrawal occur before the end of the school year.
When you matriculate at an independent/private school, you will be required to sign a contract which, among other things, obligates you to pay a stated amount of tuition. Should you withdraw from school, voluntarily or involuntarily, you will still be obligated for some or all of the tuition amount.
For this reason it is important to know the school’s policy on tuition forgiveness. For example, one school in the Charleston area calibrates the percentage of tuition obligation on the basis of academic quarters. That is, there is no obligation if the student withdraws before the beginning of the school year, and the obligation then increases from 25% to 50% to 75% for each quarter and rises to 100% after the beginning of the fourth quarter. This is just one example and there are lots of variation; but whatever the policy, it should be clearly expressed in the contractual agreement between the family and the school.
In some instances, when tuition payments are made in two or more installments, a school may require you to have tuition insurance. This protects the school in that it has built its budget based on an anticipated amount of tuition revenue and, if covered by an insurance policy, the school does not have to pursue collection actions against families. Conversely, the policy protects families against unforeseen circumstances. Cost of coverage will most likely be from 1%-3% of the tuition amount.