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Can You Borrow Against a Group Life Insurance Policy to Pay for College?

Life insurance is something virtually everyone needs. We usually think of it as a safety net for our loved ones in the event of our death. We want to make sure they can continue their way of life if we were to pass on.

But life insurance, specifically permanent, cash value life insurance, has other benefits. According to Investopedia, “Cash value life insurance is a form of permanent life insurance that features a cash value savings component. The policyholder can use the cash value for many purposes, such as a source of loans, as a source of cash, or to pay policy premiums.”1


Can only borrow from life insurance policies that build cash value.

One option for using the cash value of a life insurance policy is to help pay for your children’s college. MarketWatch tells us using your permanent life (whole life or universal life) insurance policy is “an unconventional and often underused way to help pay the tuition.”2

Since the cost of college in the U.S. has grown so significantly, it’s a good idea to start planning and saving early, and a cash value life insurance policy may be a good way to help cover the costs.

It’s important to note that you can only borrow from life insurance policies that build cash value. If you have a group life insurance policy, for example, you probably don’t have the option to borrow against it for college funds. According to Insure.com, normally “you can’t borrow from a group life policy or cash it in” because “typically the life insurance offered as an employee benefit is term life, which has no cash value.”3

If saving for college is part of the reason you’d like to invest in a life insurance policy, remember that in most cases, group life insurance policies are term life and have no cash value. This means that you should make sure you buy a permanent one that builds cash value that you can borrow against. You should always read and thoroughly understand your policy to know its limitations and its benefits.

Please remember: Life insurance is not the same as an investment vehicle. Life insurance is not meant to be used as a savings account. If you have any questions about your existing group policy, contact your benefits administrator or the insurance company from which you purchased your policy. If you have any questions about using a cash value life insurance policy to help pay for college, contact a financial advisor or a licensed insurance agent.