While most people understand that the cost of a college education has been steadily rising, few realize the magnitude of the
increase. According to the FinAid Page (www.finaid.org), a good rule of thumb is to expect college costs to increase at about
twice the rate of inflation. For example, average total charges (tuition, fees, room and board) rose 5.9% for the 2009-10
school year1 while the inflation rate for the year 2009 was 2.7%.2
shows the average annual published college cost (tuition, fees, room and board) for a public four-year institution in 2009
dollars. In other words, this chart shows the annual cost of college with the effects of inflation removed.
A Solution from an Unexpected Source
Using your personal savings should be the primary source for college funding. However, there is one “flaw,” with personal
savings. If the family’s primary breadwinner passes unexpectedly, personal savings plans generally come to an abrupt end. A
life insurance policy can ensure the full funding amount is immediately available to pay for college.
that accumulates cash value, such as an Indexed Universal Life policy can provide a way to help pay for college costs. Some
of the advantages of a permanent life insurance policy include:
used for any other purpose without tax consequences.3
Tax-Deferred Growth — Cash value growth inside the policy is tax-deferred.
Policy Loan Options — Policy loans are generally free from income tax.
An Indexed Universal Life Insurance provides death benefit protection and a shield from negative returns. With the opportunity
to earn interest based on the upward movement of a stock index, an IUL offers upside potential with downside protection
– a “shield” from negative returns. The secret to the shield is the Index Account:
• It’s linked to a stock index such as the S&P 500.
• The change in index value is locked in annually.4
• Zero percent floor – the Index Account can’t drop below its annual starting point!
• Minimum Account Value – Every eight years, we’ll make sure that the account value has earned at least a 3% average
per year calculated from policy issue.
Here are the key points to remember about funding a college education with an IUL.
1. College costs are increasing at roughly double the rate of inflation, and have done so for the past 30 years.
2. Life insurance helps ensure that a college savings plan is completed if the primary breadwinner dies prematurely.
3. Cash value growth is tax deferred and policy loans are generally income tax free.
4. The Indexed Account is linked to the growth of a stock index, but provides the safety net of a zero percent floor, all the while locking in any returns
on an annual basis.
College costs are increasing at a rate faster than inflation. The amount you are saving may not be enough.
• If you haven’t started saving, there’s no time like the present!
• Make sure the goal will be met. Talk to your agent about an IUL for your child's college planning.