When reviewing options for college savings, many people don’t consider one of the most effective college savings vehicles – permanent life insurance.

While other solutions (like 529 or Coverdell plans) have value, they fall short if you die or become disabled and can’t continue to make annual contributions. A properly structured permanent life insurance policy can overcome those obstacles.

Permanent life insurance offers several advantages as part of a college savings plan.

• The obvious benefit of using permanent life insurance as the foundation of your college savings plan is that it provides a cash benefit in the event of the insured’s death – meaning that if something happens to you or your spouse, your children will still have the money to go to college.
• Your permanent life insurance policy will accumulate cash value that can be accessed tax deferred.
• You will be able to access the cash value of the policy to help pay tuition, books, and living expenses.  But, unlike 529 or Coverdell plans, you can also access the cash value of a permanent life insurance policy for any other purpose with no restrictions.
• Permanent life insurance is considered to be a non-assessable asset on the College FAFSA.  It is one of the few assets that will not be taken into consideration for the purposes of determining your child’s eligibility for financial aid.

Some education savings tools have strict rules about how and when the money you have saved must be used to avoid penalties and taxes. That is not the case with a permanent life insurance policy.  You can access the cash value for school or for any other purpose.  Or, you can leave the cash value in the policy and allow it to continue to grow.

Jim Kuhner, owner and certified college planning specialist at College Selection Strategy in Keller Texas, says “The thing about a permanent life insurance policy is that you want to put as much money in as the government will allow you.”

Permanent life insurance isn’t the most obvious choice, but due to favorable tax treatment and exclusion from financial aid asset calculations, it’s clear that it should be the foundation of your college funding plan.

Click here to visit my website and to contact me to review your college funding plan.