The College Board estimates that the average cost of four years of private college in 2010 will be $180,000. For anyone with children, the estimated cost of a college education can be overwhelming. There are a number of financial models for saving for this huge expense – Life Insurance Info reviews life insurance as a component of college savings.
College and Permanent Life Insurance
One way to save for college education is to have a permanent life insurance plan. This type of policy builds cash value, allowing you to borrow against the value tax-free. This money can be used to pay tuition or other expenses. Keep in mind that any amount borrowed from the life insurnace policy is subject to interest charges and if unpaid at the time of your death, can result in a reduced death benefit.
In addition to the fact that you can borrow against your policy, the very nature of a life insurance policy is to provide protection in the event that you become disabled or die. Without a policy, your family will not be financially protected after the loss of your income. With a policy in place, in the event of your death, your college savings plan is protected.
Term Life Insurance for College Fees
The main goal of a term policy is to provide protection from anything happening to your child’s college savings in the event of your death. Term life insurance can be purchased for a specific period of time, or term. Should you die during the policy, your family will receive a tax-free payout that can be used for, among other things, funding a college education.
- Any assets you put into the trust must remain there.
- Beneficiaries cannot be added or removed.
- The appointed trustee can only be changed if that person agrees to resign.
- Irrevocable trusts allow you to enjoy tax savings since the beneficiary of the trust pays the income taxes on any earnings.
- You lose the option of borrowing against the cash value.
To find out estimate future college costs for your child, visit Fidelity’s website to use the College Planner Calculator to estimate your coverage needs for a college savings plan.
If you don’t have life insurance or would like to add the term life insurance, please call your local agent or visit our website for a free quote.