One of the many benefits of life insurance is how versatile it is. It can be purchased in virtually any amount (depending on age and health) and proceeds aren’t processed through an estate. It can be purchased as term insurance or as permanent/whole life insurance. Most appreciate that there are no restrictions on the use of life insurance proceeds so they may be used for any purpose.
Many families purchase life insurance for the specific purpose of helping ensure a college education. Here are three ways that life insurance can help pay for higher education.
One of the main ways life insurance can help ensure college costs are provided for is by sufficiently insuring the life of a parent or main breadwinner in a family.. The death of a parent will not only have a significant emotional impact on a child, but it potentially changes the trajectory of that child’s education. When determining how much life insurance is sufficient for young families, they should take in consideration the costs of a college education for each of their children. The proceeds don’t necessarily have to be used for that purpose but it can be comforting to know funding will be in place should a parent’s death occur.
Younger families, in particular, can find it challenging to set aside money for the future, including a college education. This is why many families will take out a whole life or permanent life insurance policy on a child. A life insurance policy on a child provides coverage and assures the insurability of the child. When purchased in sufficient amounts, permanent life insurance can build enough value to be very helpful in paying for college. Families may find paying for life insurance easier than trying to save money separately. When it comes time for college, the value of the policy can be tapped into through a loan or cashed in for the purpose of helping to pay for college.
Because a permanent life insurance policy can build cash value, it becomes a financial asset. This is true whether the policy is on the student or the parent. If a young parent, for example, would take out a significant whole life insurance policy when a child is born, not only will they have additional life insurance protection through some critical years, but their life insurance policy will grow in value. This is an asset that can be used when acquiring college funding for a child if the parent should so choose.
If you are a young parent looking for ways to help ensure your child can attend college, contact us to discuss how life insurance may play a role. We can help you take the steps today to help ensure the education of your child tomorrow.