Insurance & Paying for College

Insurance & Paying for College

Here's a negative word -- life insurance!! I started my career in the life insurance business. I followed my father in the business. I was in the business for 15 years until clients encouraged me to "morph" the business into an investment management business. I remember going to high school class reunions and watch classmates turn from me once they found out I was in the life insurance business. I was a professional. I earned the coveted "Chartered Life Underwriter" designation in just three years. I followed that by earning the "Chartered Financial Consultant" designation two years after that. So, why the history? I want to lend credibility to what I am about to say.

I do NOT believe life insurance is a good investment vehicle, but I DO believe it can be a great way to provide the insurance you need and provide a vehicle to force you to save money. My father was the most disciplined man I knew. He could save money better than anyone. Even he had cash value life insurance to the day he died. Here's a fact: Americans do not save money well. My father said the only money most people save is in retirement plans and life insurance. Take the test.....add up all the money you have earned through the years. Now, add up your net worth and divide it by your total earnings. It won't be a very large percentage in most cases.

So, let's get back to insurance and college. As soon as you can, buy cash value life insurance. As a side, not all your insurance necessarily needs to be in cash value insurance. There is a use for "term" insurance. Find a professional insurance agent to help you determine how much of each type of insurance you need. For my purposes, I am talking about the portion of your life insurance program that should be in cash value insurance. Try to structure the policy so that you are paying in enough premiums for the policy to "pay for itself" in 10 to 12 years. Once you reach that point, continue paying the premiums. Depending on how much death benefit you have and how much premiums you are paying, the cash value after 10-15 years can be substantial.

I started buying cash value insurance before I even got married. I did this because I was certain I would marry and have children, and I knew I would need life insurance some day. Once I had kids, I realized that I could always fall back on my life insurance cash values to help fund college, if I was unable to pay for it from my income. I bought my life insurance to provide income for my family and to pay for college should I die prematurely. But, if I lived, I could use the cash value to pay for college. The plan worked.

Remember, life insurance is not a great investment, but if you need life insurance for more than 10 years, cash value insurance is most likely the cheapest way to buy life insurance AND it will provide a way to save money that can be used for college, retirement, or an unexpected emergency. Start your life insurance program early!