Permanent life insurance is one of the most effective ways to protect your family and save money for your kids' college education at the same time. Over time, your permanent policy gains cash value. You can pull that cash value out to help pay for tuition, room and board, computers, and more. This way, your family gets the peace of mind that life insurance provides, plus it helps pay for college!
But which type of permanent life insurance is right for you?
Whole Life Insurance
The most basic kind of permanent life insurance, whole life offers stable and predictable cash value growth. You get a guaranteed death benefit (as long as you keep your policy in force by making payments), and the amount of your monthly payments is set in stone—they won't go up or down. You'll know exactly how much cash value you have at any time, since its growth is tied to a set interest rate. That cash value accumulates tax-deferred. When you're ready, you can pull it back out and use it to help pay your child's educational expenses.
Universal Life Insurance
Universal offers the greatest amount of flexibility. You have the freedom to adjust the amount of your policy's death benefit and monthly payments. Yes, you read that right...you get to choose how much you pay into the policy and when. You just need to be sure to keep enough in the account to cover the periodic service fees. If you like, you can also tie your cash value to an investment vehicle (this is called "variable universal life insurance"). You can make monthly payments, quarterly payments, or fund your policy in one lump sum. With this kind of policy, it's all up to you.
Variable Universal Life Insurance
This type of policy gives you more options for growing your cash value. It works best for families that want the guaranteed protection permanent life insurance offers, but also want a little room to play around with their investment potential. You have the option of tying your cash value growth to investment options offered by your insurer. These are usually a combination of mutual funds also managed by that insurer. Some insurers also let you skip a few payments if you have enough cash value accumulated to cover them.
Of course, the peace of mind, and financial security a life insurance policy brings your loved ones should be your top consideration.