Cash Value Life Insurance Could Be A Secret Weapon For College Savings
October 2, 2019 by Jerilyn Klein Bier
September is Life Insurance Awareness Month and a wealth advisor with a specialty in college planning wants more financial advisors and parents to understand how permanent life insurance policies (including whole life and indexed universal life) can help fund college expenses.
Beth Walker, a wealth advisor with Omaha-headquartered Carson Wealth Management and founder of the Center for College Solutions, a consulting firm in Colorado Springs, isn’t suggesting parents abandon 529 college savings plans for permanent life insurance contracts (also referred to as cash value contracts) but thinks the strategy deserves a closer look.
According to Walker, almost every permanent life insurance contract includes loan provisions that enable the policyholder to borrow on the cash value that has accumulated. A parent is typically the owner and the insured on policies used to fund college, she said.
The cash value of permanent life insurance contracts is unlikely to sabotage financial aid awards because it’s excluded from the Free Application for Federal Student Aid formula and only a handful of colleges that require the CSS Profile application inquire about the cash value of policies, said Walker.