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Using Life Insurance to
Help with College Funding
Help Your Clients Gain Financial Protection
& Help with College Costs
 
 

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The primary purpose of life insurance is to provide a death benefit to beneficiaries.
It can be designed to meet your clients' changing needs with features such as a
flexible death benefit and flexible premiums. The death benefit protection can make
life insurance an attractive choice for establishing a self-completing plan to help
fund a college education. Permanent life insurance that can accumulate cash value
may be used to help pay for college costs. Items covered below include:

  • Client profile
  • Helpful tips
  • Ideas
  • Sample cases

North American is here to support your sales efforts—please contact us
today at (800) 800-3656, extension 10411 or email
salessupport@nacolah.com
to learn how to put this powerful strategy
to work for you.

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The typical client profile may include:

  • Those with a need for life insurance protection.
  • Young families with children aged zero to 13.
  • People concerned about college tuition costs.
  • Those who are possibly looking to help supplement income in retirement years.

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  • The life insurance coverage should be on the primary breadwinner. Aim for the lowest death
    benefit possible that meets the client's needs and still provides ample funding for college
    should death occur before the first child enters college.
  • Since the policy could potentially be repurposed for supplemental retirement income, the
    client may want to keep the death benefit low for the longest period of time possible. Use
    the guideline premium test (GPT) keeping in mind that the death benefit may be higher in the
    early years, but lower for a longer number of years because the death benefit can corridor
    quickly with the cash value accumulation test (CVAT).
  • Illustrate both variable interest rate loans1 and zero cost loans.2 It's impossible to forecast
    what the interest rate environment will be in the future. Planning for both scenarios can
    increase your credibility with the client and can provide reasonable expectations.
  • You can set up the illustration as a defined benefit (a specific college cost) or a defined
    contribution plan (a specific premium payment).
  • Determine whether to pay for annual college bills or to repay student loans. The older
    the child, the more beneficial it is to repay student loans as this provides more time for
    the cash value to grow. Be mindful of the timing at which each child will enter/exit college.
  • Determine whether to continue funding the policy after the college period is over.
    This decision depends upon the client's retirement goals.

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Builder IUL® Indexed Universal Life Insurance

Peter and Elizabeth are new parents and feel it's important to plan ahead for their son's (currently 3 months old) future. They realize that should something happen to Peter, the primary breadwinner, it will be challenging for Elizabeth to keep up with expenses and help pay for college. The couple meets with their life insurance agent to discuss their need for immediate death benefit protection along with financial protection for their loved ones in the future. While discussing their situation, their agent tells them that life insurance may also be used to help fund their son's education. After a needs-based analysis, the couple plans to pay $500 per month in premiums for the Builder IUL policy with a death benefit amount of $180,000. The couple is pleased with the death benefit protection and the flexibility it provides. The policy projects that they can take net zero cost loans of $45,519 for four years beginning in year 18 to help pay for their son's college education.

 

For help with college funding case design, contact Sales Development today at
(800) 800-3656 ext. 10411 or email at salessupport@nacolah.com.