Is a variable life insurance policy or a variable annuity (VA) a suitable financial product for parents to use to save for a childs college education?
No, a variable life insurance policy is not a wise choice to use as a savings vehicle for a college education for the following reasons: • Although variable life insurance has cash value that can increase over time if your underlying investments in the policy perform well, you are also paying life insurance premiums that are quite expensive. Those premium payments will significantly eat into the gains you could make on your cash value. • The cash value of a life insurance policy should not be considered an investment because any partial withdrawals or loans that you do not pay back will reduce your death benefit. So if you don’t pay the loan back, your beneficiaries will when you die. • If you partially withdraw or take out a loan against your cash value, and the withdrawal or loan amount exceeds the premiums you have paid into the policy, you will be taxed on the difference for variable life policies. • If you choose to surrender your variable life insurance policy, you also may have
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