The Gift of Forethought
The idea of starting a savings account with monthly contributions is a common goal for many new parents that yields little results. Things gets in the way. The furnace needs to be repaired or the car needs new tires. Starting a savings account gets put on the back burner and before you know it, baby is grown up. For some, creating a “bill” to be paid monthly is a great way to keep your goals on track and get results. A Life Insurance policy can solve these problems and more.
Purchasing Life Insurance is a great way to set a child up for success! Many policies provide far more than final expense benefits. Policies can potentially include a large tax-free cash accumulation vehicle, depending on the insurance company. Children are generally at their healthiest when they are young and therefore get the best policy price. This makes easier to set your child or grandchild on the path toward financial independence.
Let’s say you purchase a policy when your child is first born. That low premium will never change and can be paid monthly for as long as you’d like. You can design the policy to be paid in full by age 25 or 30. The premiums can be diversified to create security and growth. For example, 10% of your funds could be placed in a fixed market to guarantee earnings, while the remaining 90% go into an indexed market account. Now you can potentially enjoy higher returns than traditional methods with no risk of loss.
Many insurance providers offer additional riders to further customize and increase the value of your policy. The “Guaranteed Insurability Option” allows the insured to increase the insurance benefit without underwriting at certain age benchmarks such as ages 25, 30 etc.
Throughout the life of the policy money can be withdrawn as loans. This money can be used towards tuition, a down payment on a house or business, a car, etc. Maybe even repay yourself for the years of premiums paid! The remaining money in the policy continues to grow for the life of the policy. Imagine providing the gift of creating a personal lending bank with the lowest rates in town!
A few important reminders, the parent or grandparent purchasing this policy will need to have double the life insurance on themselves. This is a federal requirement. If the purchaser is uninsurable, it is important to reach out to a licensed agent to see what can be done. It is important to remember this is not a short-term college savings plan. The policy needs a minimum of 15 years of runway to really take off if your primary focus in college funding.
Even in the face of 2020’s challenges, families continue to grow. Thankfully, babies are being born every day. Now more than ever, we have their future in mind and want to make sure our children and grandchildren are protected financially.