Although we intend to start a college fund, somehow we just haven't found the time. Life Insurance is an excellent college savings tool. If you're thinking about a 529 as a college fund you may want to reconsider; a 529 is an asset lowering the amount of financial aid for which your student will qualify and if your child does not go to college there is a 10% penalty to withdraw and the withdrawal incurs capital gains taxes. Life Insurance does not impact the amount of financial add, the amount withdrawn is interest fee, not taxed, and can be used for anything; it is the perfect tool for college savings.
Life Insurance is an intelligent way to fund a retirement plan. For obvious reasons, the sooner you start the better as the more time you have to invest increases the amount available at retirement. The less obvious, as this is a life product, age impacts the premium...so the younger you are when you purchase, the cheaper it will be. The accumulated cash value does not need to go toward retirement. You can withdrawal any time, tax free, no penalty, and use the funds for whatever you want: maybe a nice vacation or a new car. As you repay the "loan" you are repaying yourself. Remember the college fund? After college, the college fund can become a retirement plan.
Why buy Life Insurance for a child? In addition to a college savings fund then retirement/savings plan, the child will have guaranteed insurability; meaning, once the coverage is in place, it cannot be cancelled. If your
child develops a disease which would cause them to become uninsurable (like juvenile diabetes or later in life breast cancer) the policy won’t be cancelled. Once the child reaches the age of 18, without any physical exam or underwriting, they will be allowed to increase the face value of the policy; it is recommended they increase the face value at around age 30 or once they have children.
How much life insurance do you need to protect your family allowing them to maintain their lifestyle (stay in your home, children to remain in their schools, money for college, pay the mortgage, pay other debt, childcare, care for aging parents, funeral expenses etc.)? Dave Ramsey advises buying life insurance at 10 to 12 times your annual income; at the very least 5 times your annual income plus your mortgage. IMPORTANT: BOTH PARENTS NEED LIFE INSURANCE. Here is an easy formula to derive a rough estimate on how much life insurance you need: MORTGAGE & DEBT (car payments, credit cards, etc) plus INCOME REPLACEMENT (annual income multiplied by years needed) plus EXPENSES (final expenses, immediate cash, education costs, long term childcare, aging parent care, charitable donations etc.) less amount of any life policies in force.
You can leave that special someone a savings/college/retirement fund simply by taking out a Life Insurance Policy.
Say "thank-you" to an institution that has impacted your life by making the institution the beneficiary of a Life Insurance policy.; some examples: place of worship, alma mater, fraternal organization, service organization.