How Life Insurance Can Fund College in 2019

Life Insurance as a College Fund

In 2019, families increasingly turned to life insurance policies as a source of college savings. Unlike traditional savings accounts, certain policies offer death benefits that can be accessed by beneficiaries and may include cash value growth that can be borrowed against or withdrawn to cover tuition, books, and housing.

Types of Policies That Cover College Expenses

Two main policy classes provide college‑funding opportunities:

• Whole Life Insurance – Builds cash value at a guaranteed rate. Policyholders can take tax‑free loans against this value, which can be used for college fees.
• Universal Life Insurance – Offers flexible premiums and variable investment options. Cash value grows with market performance, providing potentially higher payouts for education costs.

How the Payout Works in 2019

When a beneficiary files a claim after the policyholder's death, the death benefit is paid out in a lump sum. If the beneficiary chooses to use the policy's cash value prior to death, they must take a policy loan. The loan accrues interest and reduces the death benefit unless repaid. For college funding, families often opt for a cash value withdrawal or a loan to avoid a large tax bill.

Key Considerations for 2019 Families

Choosing a life‑insurance‑based college fund requires evaluating:

• Premium affordability versus projected college costs.
• Cash value growth rates versus inflation.
• Loan interest rates and repayment terms.
• Potential tax implications of early withdrawals.

Comparing Policies in 2019