What is Whole Life Insurance?
Whole life insurance is a type of permanent life insurance that provides coverage for the life of the insured. In addition to paying a death benefit, whole life insurance policies are also known for carrying a cash value component, which allows the policyholder, through the payment of premiums over time, to build cash value.2
This cash value can later be used as a living benefit.
What is Cash Value?
Cash value is a portion of your life insurance policy that accrues interest and can be withdrawn at a later date to be used by the policyholder. This benefit can be used during the life of the insured for an array of purposes as long as the amount withdrawn from the policy does not exceed the amount of premiums paid in to the policy, taking into consideration any insurance provider fees.3
In addition to paying a death benefit, whole life insurance policies are also known for carrying a cash value component, which allows the policyholder, through the payment of premiums over time, to build cash value.
Can the Cash Value of a Whole Life Policy Help Pay for College?
College can come at an alarmingly high cost, so having a way to pay for your kid’s college before they can walk is a good idea. During the late 1970’s, the average cost for attending a public college was $8,250, with private institutions costing $17,680 per year on average.1
By 2008, those costs had just about doubled to $16,460 for a year of public college and $38,720 for a year of private college.1
In 2019, the average cost for a year of college ballooned further, reaching $21,370 for a public institution and $48,510 for a private institution – increasing by over 25% in the last 10 years alone.1
When done right, a long-term savings plan can help protect your child from crushing student loan debt and ensure they graduate without spending so much as a penny. The best part is that money featured in the cash value component of your whole life insurance policy grows tax-deferred, keeping Uncle Sam’s paws out of your wallet – letting you use it for more important things, like sending the kids to school.4
Whether or not you’re considering purchasing a whole life insurance policy to pay for your child’s college education, a whole life insurance policy is a great alternative for those looking to save money. Whether you plan to use the cash value from a whole life policy to pay for textbooks and tuition, or a relaxing retreat post-retirement, whole life policies should be considered heavily when exploring your life insurance options. Reach out to a licensed life insurance agent in your area to learn more.