Life Insurance vs 529 When Funding Education.
When you use a 529 plan to save money for higher education costs, colleges, and universities will count that accumulated cash among your family’s assets when calculating how much financial aid your child may or may not qualify to receive. However, the money amassed in a whole or universal life insurance policy is not counted as an asset for financial aid qualification purposes. This matters because of the steep cost of college tuition these days, families need a well-thought-out strategy for minimizing out-of-pocket cost.
529 vs life insurance
Switching your savings strategy from a 529 plan to a whole life insurance plan can effectively improve your child’s chances of earning more financial aid.
- Term life insurance: Term life insurance is a type of life insurance that provides coverage for a specific period of time, such as 10 or 20 years. If the insured person dies during the term of the policy, the death benefit will be paid to the beneficiary. The death benefit can be used to pay for educational expenses, such as tuition, fees, and books.
- Whole life insurance: Whole life insurance is a type of life insurance that provides coverage for the life of the insured person. Whole life insurance also accumulates cash value over time. The cash value can be borrowed against or withdrawn from during the insured person’s lifetime. The cash value can also be used to pay for educational expenses.
- Universal life insurance: Universal life insurance is a type of life insurance that combines the features of term life insurance and whole life insurance. Universal life insurance allows the insured person to make contributions to the policy and to choose how the cash value is invested. The cash value can be used to pay for educational expenses.
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