Should you buy tuition refund insurance?

Suppose the student attending a private school or college that you're footing the bill for gets ill during the school year and is forced to withdraw. What about the tuition you've already paid? Can you get it back?

Often the answer is no, which, as you might imagine, can result in inconsiderable ill will or even lawsuits. To head off this exposure, some schools include the cost of tuition refund insurance in their fees. This assures the school that it can keep the money while appeasing the sick student's parents. The question is, does the insurance cost reflect the real probability of this occurring, or is it an overly expensive niche product?

The insurance comes in four flavors; compulsory, in which all students are covered and all students pay the premium as part of their fees; mandatory, in which those who choose a payment option other than full-year up-front are required to buy it; opt-out, where the insurance is included in the fee but can be removed on request; and voluntary.