One of the major disadvantages of being a young person in 2018 is the incredibly high cost of a pursuing a higher education. Unfortunately, the cost of college has been steadily increasing over the last decade, and shows no signs of slowing down. As a parent, this can be an incredible stress on your financial future. That’s why we’re taking the time to write this article explaining how the right insurance policy can actually help pay for a college education.
Yes, you read that correctly. While not every insurance policy can help, a life insurance policy, specifically, can actually help pay for a college education.
Most people, especially parents, understand why having a life insurance policy is important, college tuition aside. The sad reality is that life happens—often without any consideration for your well laid plans. A proper life insurance policy gives you the peace of mind that no matter what happens, your family will be financially safe.
While parents have a good idea of why life insurance is important, many don’t realize that it can also help them pay for their child’s college education. A 2018 life insurance survey conducted by the Allianz Life Insurance Company of North America found that only 51 percent of Americans were either unsure, or did not believe that the cash value of a permanent life insurance policy can be used to pay for a college education.
If you have a permanent life insurance policy, you can actually take a loan out against the cash value of that policy. That loan can then be used to pay college tuition. One of the amazing things about doing that is the loan is actually income tax free. Though, since it is a loan, you will have to pay the money back with interest.
When you have a permanent life insurance policy, you can make sure that a percentage of every dollar you put towards the cost of insurance and the death benefit, also goes to improving the cash value of the policy. That means that the longer you have the policy, the larger the cash value you have. That should be a huge incentive to get a life insurance policy early on in life. By the time college rolls around, you should have have a fairly heavy cash value in that policy.
There are a few important caveats to keep in mind if you are planning to do this at some point. First, the total value of your loan cannot exceed the cash value of your life insurance policy. Rarely will that value cover the entire cost of a college education. So, while this can help you pay for college, it is unlikely that it will pay for all of it.
Second, taking a loan out against your policy can actually affect the the death benefit of that life insurance policy. Policy loans and withdrawals will both reduce the cash value that is available, and could even cause the policy to lapse. That can mean that if you take out a loan against the cash value, you could see your policy premiums go up to keep the policy itself active.
If you were on the fence about life insurance, hopefully this is incentive enough to invest in a policy. Life insurance is an important thing to have no matter what, and it’s important to get a policy as soon as possible. Remember, life insurance premiums actually go up the older you get. The earlier you get a policy, the lower your premium will.
If you have any questions about life insurance, or want to inquire about a policy, we encourage you to reach out to TGS Insurance. They are experts in the life insurance field and are always ready to help answer any questions that you may have. Visit www.tgsinsurance.com to learn more.