Does Life Insurance for a Child Make Sense?

It Does When You Use the Policy as a College Planning Tool.

For many people, the purchase of life insurance means that loved ones won’t have to worry about dipping into savings or other assets to pay for the insured’s funeral and other final expenses, and / or that debts will be paid and ongoing living expenses covered.

But what if the insured is a young child who doesn’t have any income to replace or large debts to repay? Does the purchase of life insurance still make sense?

It can if you plan to use the policy as an overall financial planning tool for large future expenses such as college.

Life Insurance as a College Savings Tool

With the high (and rising) cost of a college education, most families need to rely on financial aid and / or some type of savings plan in order to ensure that tuition can be paid. For nearly 3 in 10 U.S. households, the savings method of choice is a tax-advantaged 529 college savings plan.1

With this type of plan, contributions are invested in mutual funds, while the earnings are allowed to grow on a tax-deferred basis. This means that there is no tax due each year on the gain – which in turn can allow the money to grow and compound at a faster rate than a taxable plan.

When it comes time to withdraw these 529 plan funds, provided that the money is used for certain types of education-related expenses, there will be no capital gains tax incurred on the funds that are removed. In addition, many states will also allow for a tax deduction or credit on the contributions that go into the plan – which can make a 529 plan even more appealing.

But what if the money in a 529 college savings plan isn’t enough?

One way to help with supplementing these funds is to purchase a cash value life insurance policy. Here, the cash that is in the cash value component of the policy is also allowed to grow tax-deferred.

And, with policies like whole life insurance, the money in the cash component will also grow at a guaranteed rate – so there is no risk of loss to these funds, regardless of what happens in the stock market.

As an extra added bonus, just in case the child opts not to attend college in the future, the cash can either be left in the policy to continue growing and / or it may be used for any reason – such as the down payment on a home, the purchase of a vehicle, or any other need.

By purchasing a life insurance policy on a young child, it can also help to essentially lock in coverage on his or her life for many years to come (provided that the premium is paid). This means that, even if the child were to contract a serious health issue down the road, they would still be have life insurance coverage in place to protect the financial needs of their own spouse, children, or other loved ones in the future.


Offer Real Financial Tools that Clients Can Use

While most people are aware of how life insurance can be used to cover final expenses or to replace lost income, many do not realize that this flexible financial vehicle can be incorporated as part of an overall financial plan for both short- and long-term needs.

By providing a wide array of solutions, you can stand out and offer real value with such recommendations – regardless of whether you’re just starting out in the insurance business, or you’ve been at it for many years.

Are you looking to generate a predictable and consistent flow of leads for life insurance every month so that you can keep your calendar filled with clients and prospects who want to talk to you?

Then look no further! You can easily join thousands of other insurance and financial professionals who are offering life insurance as a college savings mechanism – and who are generating thousands of additional commission dollars each and every month as a result.

Ready to learn more? Just give us a call now, toll-free, at 1-800-643-6143 for more information on how to get started.



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Brian J. Kay, Executive Director, Leads4Insurance
921 Port Washington Blvd., Suite # 3 Port Washington, NY 11050
tel:(516)944-6700 fax:(516)944-5275