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Using IWL for education

How one couple could use indexed whole life insurance to help cover their children’s college tuition.
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It’s no secret that Americans continue to worry about the  costs of college. It’s also no wonder, as tuition and fees continue to rise, leaving the average student attending an in-state public university to cover more than $10,000 annually. For out-of-state students, that number climbs to more than $22,000, rocketing all the way to over $38,000 for students attending private universities.1 And those numbers don’t include room and board, which tack on more than $10,000 annually on average.2

Although scholarships, grants and other types of aid are available, students and their parents may be on the hook for significant expenses or debt. 529 plans may offer important tax benefits that can help accumulate and distribute assets, but they can’t be used to cover all costs, such as off-campus room and board expenses, which typically don’t qualify.3

Indexed whole life insurance may be a useful tool for some clients when planning for college costs. It:
  • has a death benefit which could offset college costs if the insured dies prematurely
  • leverages index accounts to grow cash value, potentially leading to higher growth than some other life insurance products
  • can distribute Account Value on a tax-preferred basis provided the policy is not a Modified Endowment Contract
  • has an optional overloan protection rider which may prevent a heavily loaned policy from lapsing

Education funding in action

Meet Chris and Amanda Chris and Amanda are a professional couple in their early thirties who celebrated the birth of their son, Liam, last year. They know that preparing early will ease the burden of saving for college, and ask their financial professional for advice. Their agent recommends a Prestige Indexed 10 Pay policy. Because its growth is partially based on market returns, it offers significant upside potential. But unlike many other alternative assets, it isn’t subject to market risks thanks to a 0% floor on returns, and it can cover any of Liam’s expenses without being subject to qualification guidelines.4 Its cash value also isn’t considered an asset under current federal student aid guidelines, so Liam may be eligible for a higher level of aid.5

When Amanda gives birth to Olivia a year later, they’re glad they took the advice, because now they’ll be able to access their policy’s cash value for both children. 
IWL for college funding example
If current assumptions and return projections hold, after paying a total of $150,000 in premium, their IWL policy may be able to provide more than $40,000 in loans each year their kids attended college, for a total of more than $250,000.6 Not only are Chris and Amanda able to use their policy to help fund their children’s education, but once their kids are done with school, they can still access the policy’s cash value to address other needs, whether that means helping to fund their retirement, help a child start a business or provide a legacy to Liam and Olivia when they pass away. 
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1 U.S. News & World Report, Sep. 13, 2021, “See the Average College Tuition in 2021-2022”.
2 ThinkImpact.com, “Average college tuition,” retrieved from https://www.thinkimpact.com/average-collegetuition/#:~:text=Average%20Public%20College%20Tuition,for%20a%20total%20of%20%2427%2C023  on July 5, 2022
3 Ohio National and its affiliates do not provide tax or financial planning advice.  This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax or financial planning advice. Clients should consult their own tax or financial planning advisors.
4 Although there is a 0% floor, the policy may still lose account value based on the deduction of applicable policy cost of insurance charges and fees, particularly when market performance is poor.
5 Some colleges do view life insurance as an asset when determining financial aid amounts and eligibility.
6 Hypothetical example assumes a 32-year-old male, Super Preferred rate class. Assumes 5.60% illustrated interest rate, index loans taken at ages 49-54, and $100,000 cash value target at age 100. Results depicted are based upon current, non-guaranteed rates. Non-guaranteed results may be more or less favorable than those shown. Policy loans will reduce the amount of death benefit available.

This product is not approved for sale in California. Additional approval information will be provided as appropriate.

Indexed whole life insurance is issued by Ohio National Life Assurance Corporation. Guarantees are based upon the claims-paying ability of the issuer. Policy, policy features and rider availability vary by state. Issuer not licensed to conduct business in NY. ©2022 Ohio National Financial Services, Inc.

FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC. D-828101 8-22