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YOUR LIFE INSURANCE
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How life insurance can be an option for college savings
With the costs of higher education on the rise, having a solid plan
to save for your child’s education is more important than ever. Lots
of financial vehicles exist on the market, the most popular is the
Section 529 plans that allow for savings contributions to grow tax
deferred, and can potentially be withdrawn tax free for qualified
educational expenses.
Though the 529 may be the tool of choice for college savings, the
often overlooked Cash Value Life Insurance Policy has its
advantages as well, and for some individuals may be a more
attractive option.
life Insurance Can Be A Self-completing Plan
Life insurance while being funded to build cash value will always
have a death benefit. For example if the policy that is being
funded is taken out on the breadwinner of the family and that
individual dies, the money from the death benefit provides a large
tax free sum of money to the beneficiary. That money can then be
used to fund a college education if they so choose. In this
particular scenario the savings for college are still available even if
the breadwinners income that would have been funding it goes
away, essentially completing the savings process instantaneously.
Life Insurance Cash Value Grows Tax Free And Can Be
Removed Tax Free
The cash value in the policy will be funded by your policy
premiums and will grow over the years tax free. When it has
reached the point where the funds are needed for college
expenses the cash can be taken out tax free through a policy loan.
This works similarly to a 529 despite the next point below.
Although Cash Value Life insurance has a lot of great
benefits, it is not for everyone. In order to work properly a life
policy must be “overfunded” which requires proper planning,
and works best with funding larger lump sums earlier on to
build more cash over time. For most people a 529 may be
their best bet especially if time is a factor. But if started early
and funded properly there are times when a Cash value life
policy can at times create more funds with less risk and
additional benefits. If you are contemplating starting a
college savings for your child take a look at cash value life
insurance, but be sure to discuss it with a very experienced
life insurance agent. They can explain the advantages,
disadvantages and help you make an informed decision on
whether or not life insurance is a good option for you.
If you are interested in learning more give us a call at
412-833-5351.
This INdustry INsight was provided by Jason Flinn at The Bill Flinn Agency.
For over 40 years The Bill Flinn Agency has been
serving the Bethel Park and South Hills communities.
Since opening our doors in 1972 our mission has
been to treat our customers by the golden rule. Learn
more about us at www.billflinnagency.com, or stop
by our o ce on South P ark Road in the heart of Bethel.
Life Insurance Cash Value Is Not Limited To Education
Expenses
Unlike a 529 plan there are no penalties if money is withdrawn for
non-education purposes. If your child decides not to go to college
the money in a cash value life policy can still be taken out tax free
for any other purpose you see fit, or can be kept as a tax beneficial
retirement tool for the parent. With a 529 if the money saved up is
then taxable and is subject to potential penalties if withdrawn or
used by the parent for non-college expenses.
Life Insurance Won’t A ec t Financial Aid
When funds from a cash value life insurance policy are taken out
as a loan and used for college, those funds will not a ect the
amount of financial aid that can be applied for. Whereas other
types of savings including a 529 plan can reduce the amount of
aid available. In most cases life insurance allows the money you
saved to fly under the radar and maximize the financial aid
available to you.
Lifelong peace of mind can
be yours with ERIEflex4.
SM
Let’s talk life insurance.
Guaranteed death benefit can extend to age 121. Guaranteed death benefit will expire if no premiums
are paid following initial premium, subsequent premiums are insufficient or account value is reduced by
withdrawal or loan. Contact your local ERIE Agent or see the policy for details.
Bill Flinn Agency Inc
2754 S Park Rd
Bethel Park, PA 15102-3858
www.billflinnagency.com
412-833-5351
®
ERIE life insurance products and services are provided by Erie
Family Life Insurance Company. Information regarding additional
terms, conditions, exclusions, licensure and territory information
is available at erieinsurance.com/life. Eligibility for insurance
coverage will be determined at the time of application, based upon
applicable underwriting guidelines and rules in effect at