Mistakes to avoid When Using Life Insurance for college funding

Are you preparing to support your child’s college education financially? The escalating costs of tuition may leave you wondering about the best approach to tackle this financial challenge. Since 1982, tuition has soared by a staggering 500%, surpassing even medical care and the overall Consumer Price Index in terms of cost escalation.

It’s a harsh reality: families that fail to plan ahead may struggle to afford their children’s desired college. As a financial professional, you have the power to assist clients in better preparing for these costs by incorporating a life insurance policy into their financial strategy.

However, it’s crucial to execute this strategy correctly. In this post, we’ll explore the top 5 mistakes to avoid when using life insurance for college planning.

Mistake #1: Starting too late

Commencing the college funding conversation early is essential. Even clients who haven’t previously considered life insurance should be engaged in discussions about their need for a death benefit. Initiating this dialogue sooner allows ample time for the cash value in a life insurance policy to grow, surpassing initial high expense charges.

Mistake #2: Not using accumulation-focused cash value life insurance

It’s vital to use a specific type of life insurance, such as Indexed Universal Life (IUL), to supplement college costs effectively. These policies offer cash value accumulation, providing flexibility and growth potential that term insurance lacks.

Mistake #3: Making withdrawals instead of taking loans

Clients should opt for policy loans instead of withdrawals to maintain policy growth and flexibility. Loans allow continued cash value growth, ensuring financial security while covering college expenses.

Mistake #4: Not structuring and funding the policy properly

Proper policy structure and funding are essential. Partnering with experts ensures efficient cash accumulation and maximizes accessibility when needed.

Mistake #5: Misalignment of owner, insured, and beneficiary

Understanding insurable interest and policy ownership is crucial. Each case varies, and expert guidance ensures compliance with regulations while meeting clients’ college planning objectives.

The Bottom Line

Avoiding these mistakes is pivotal for achieving your college planning goals. At The Policy Shop, our experts specialize in Indexed Universal Life (IUL) policies, specifically the CollegePLUS IUL. We ensure your policy is structured correctly, empowering you to secure your child’s educational future effectively.

Don’t hesitate to reach out if you’re seeking a reliable source to supplement college costs. Contact The Policy Shop today to lighten the load of college planning uncertainties.