Does Life Insurance Fail as a College Savings Vehicle?


In the overall realm of financial services, you would be hard pressed to find anyone who truly revels at the thought of talking about life insurance. One reason for this is because most people don’t want to dwell on what it would be like when they are gone.

But the reality is that just because someone purchases a life insurance policy, it doesn’t mean that they have to die in order for their loved ones to reap some nice benefits. In fact, just the contrary can be true when it comes to tools for helping a child or a grandchild save for their future college expenses.

 

Life Insurance – A Unique College Savings Strategy

With a permanent life insurance policy, cash value is built up on a tax-deferred basis. And, although this is similar to how cash is built up in the more “traditional” 529 college savings plan, there are a few areas where the insurance policy can offer some nice added features.

For instance, while the money that is withdrawn from the 529 plan needs to be used for tuition and / or other education-related costs, this is not the case with the life insurance cash value. In fact, these funds can be used for any need, whether or not college ends up being a part of the child’s life.

Also, the money that is inside of the life insurance policy can be borrowed rather than withdrawn. And, while there is an interest rate associated with paying the money back, borrowing rather than withdrawing can allow the full amount of the funds in the cash value to continue growing. This money, in turn, can then be used for other financial needs of the policy holder in the future, such as supplementing retirement income or paying off higher interest debt.

And of course, there is the issue of the policy’s death benefit. Here, the child (or other intended recipient of the funds) will still have that “safety net” of knowing that if the worst case scenario is to occur, they will receive the benefit proceeds – which can in turn be used for future education (or any other) expenses. These funds are received income tax-free.

 

So Is Life Insurance Really a Failure in Terms of College Funding?

Today, you are likely to find that clients don’t come running to you in order to discuss their life insurance needs. Similarly, there is also a long list of insurance and financial advisors who condemn life insurance for “failing” as a college savings vehicle.

But for those who have considered all of the aspects of this financial vehicle, a different perspective is all it can take in order to see just how beneficial using a permanent policy can truly be.

Oftentimes, it really comes down to the fact that the advisors who don’t consider life insurance for college funding just simply haven’t considered all of the aspects of exactly how this tool can be used – and used quite effectively, regardless of the circumstances that could come up between now and the time the money is needed.

 

Increase Your Commissions by Offering Clients a Unique College Savings Strategy

Want to stand out from the competition by offering clients a unique, flexible, and highly beneficial strategy for college savings, while at the same time adding substantially to your own bottom line? We can help.

Give us a call now, toll-free, at 1-800-643-6143 and we will provide you with all of the key details that you need to get started.

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Brian J. Kay, Executive Director, Leads4Insurance
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