Life InsuranceInsuring Your Child’s Future — With “Education
Insurance”
If you have read the papers
or listened to the news lately, you are probably well aware
that the cost of a college
education keeps rising — generally, at a rate higher than
the rate of inflation. A private college that would have charged
$12,000 per year for tuition and fees in 1990 is likely to charge
at least double that amount today. And public colleges are also
more costly than you might imagine. The numbers can be troubling
for parents with children who are planning to attend college
one day. Of course, there are a number of ways to cover the expense
of a college education. Student loan programs can help (assuming
the student and/or family qualifies), and there are grants and
scholarships available for many students. A part-time job or
work-study program may help, too. But, in most cases, a student’s
parents will have to come up with a significant amount of money.
At least a portion of the needed funds will
likely come from savings and investments. That might include
Coverdell Education
Savings Accounts, money from U.S. savings
bonds (which are tax-advantaged if spent on college expenses), money from mutual
fund investments, or funds placed in qualified state tuition programs (so-called “Section
529 plans”). These are all helpful sources, but there is another effective
way to accumulate money for college that is often overlooked: cash-value life
insurance. Not only is it a way to save money for a child’s education,
but it also provides a guaranteed source of funds in the event of a parent’s
premature death.
Cash value life insurance has a number of
advantages as a college financing tool. First of all, it serves
as a supplemental savings plan since
the cash value of
the policy increases with each premium payment. Second, this “savings element” grows
at a guaranteed rate and is also tax sheltered. Third, when the time comes to
begin paying for a student’s tuition, room, board, fees, etc., the parent
can borrow against the policy’s cash value at favorable interest rates.
The parent can then repay the loan principal at his or her convenience, or not
at all. Fourth, the cash value of the policy is not typically counted as an “asset” in
determining a family’s financial aid. Finally, the cash-value life insurance
coverage can provide peace of mind for the parents of young students. They can
feel confident that, even if one parent should die prematurely, funds will be
available to cover the child’s college education expenses.
Naturally, the use of cash-value
life insurance is only part of an overall plan to pay for
college costs. And, a
life insurance program that is earmarked for education expenses
should supplement — not replace — your existing life
insurance program. Why not contact us? Our professional
representatives can help you explore the ways cash-value
life insurance can help ensure that your child receives the college
education he or she
wants — and deserves. (Legal Notice)
