All Life Insurance Tips

Is variable universal life insurance a good alternative to college savings plan? It is confusing!!!?

Public Comments

1. If you are using the VUL only for college funding, then it is a BAD choice. First of all, VULs have taxes and charges on every premium payment. These usually add up to about 6%. In other words, for every $100 you pay in premiums, $6 will be taken out right up front. Then there are monthly fees associated with VULs also (approx. $20 a month). Secondly, you have the cost of insurance. Granted, if the policy is on a child the COI is probably small but if it is on an adult, the cost of insurance can reduce your cash value. Thirdly, variable life sub accounts will have higher expense ratios than most mutual funds. And last but not least, to keep the tax deferred status of the earnings the VUL policy must be kept in force. If you cancel the policy at any time, taxes are due on any gains. Thus if the VUL is not part of a bigger insurance need, you have locked yourself into a premium until you die to achieve the tax deferred status. I just can't come up with a scenario where a VUL makes more sense than a 529.
2. I am Canadian however I think insurance is pretty much the same all over the world. Life insurance is a very good long term investment. I don't think it works well short term. It does allow you to shelter money but if you have a low income you don't need to avoid taxes anyway. Most insurance plans have high fees but these often disappear if you max fund the plan. I use life insurance as a retirement vehicle not short term planning. I am a licensed insurance broker in Canada and sell a lot of tax exempt policies. I prefer whole life policies because they do tend to out perform universal life. This is in part due to lower fees, but also because universal life plans are rarely used property. If you do not put enough into the plan it is useless.
3. no no no listen to tnspro no no.
4. Be careful. Variable life insurance policies pay high commissions to agent. You need to check and see what the surrender charges are on the policy, what are the admin expenses of the policy, how are you going to get your money out when it is college time, etc..??? I would run from any agent pushing this type of product as an investment vehicle for college. good luck.
5. No....stop right now!!!! Don't EVER consider using a variable universal life policy for college savings. You've been given bad advice by somebody who makes a BIG commission for selling you such a policy. With a VUL policy you could end up with higher and higher premium payments if the markets go down and have all of your investment gains eaten by life premiums if the market really goes south. Why pay for insurance when you are trying to save for college. You are MUCH, MUCH better off opening your own 529 plan and enjoying big tax savings with much lower (if not non-existant) selling fees. If you really feel you need life insurance, buy a cheap term policy and use the difference in premiums to invest in a 529 or an Education IRA.
6. Life insurance plans are not good for investing. Why? They earn low rate of return and the money you put into it does not belong to you. Life insurance should only be bought for income protection in case you die. If you want to start saving for college, you should invest in 529 plans or Coverdell plans. These earn higher rate of return at the beginning and then it switch to more conservative mutual funds to protect the assets as the child approaches 18 years old. You should always keep your investments separate from any insurance product. If your other insurance like car or home insurance doesn't have a savings plan, why should your life insurance?