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Tuition insurance coverage questioned by mental health advocates

Miami parents who are getting their kids ready for college right now may not know of a financial planning tool available to them. Actually, it's available to anyone in a private educational institution, kindergarten through the end of college. It is tuition insurance. But, like all insurance products, before you buy, you need to look closely at the fine print and figure out what is covered -- and what is not covered.

In broad terms, the purpose of the insurance is to reimburse the parent if the child cannot finish the term for health reasons. The coverage is offered by Sallie Mae (in partnership with another company).

The coverage kicks in when the child breaks a leg or comes down with pneumonia, or if the child is depressed or having adjustment issues. The problem is that the payout is different for health and mental health issues: The policy reimburses health-related withdrawals at 100 percent. Mental health withdrawals are paid at 75 percent.

Mental health advocates have fought this kind of disparity for decades, and they have actually made inroads. Companies offering mental health coverage, for example, must comply with laws mandating equal coverage for physical and mental illness.

But tuition insurance isn't health insurance. It is insurance that is based exclusively on your health. And that's not the same thing.

It's certainly acting like every stereotypical insurance policy, though: The policy limits coverage for the most common condition.

We'll continue this in our next post.

Source: New York Times, "Tuition Refunds, but Not Quite on Equal Terms," Ron Lieber, 07/22/2011

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