Henry Jones wants his son, Henry Jr., to go to college just like he did. But, because his wife is sadly deceased, Henry is a single father. He’s not sure he'll be able to save enough money for his son’s college tuition. Junior is off on adventures quite often, so Henry Sr. is also a bit uneasy about dumping money into a 529 plan. What if his son ends up skipping college all together?

So he turns to permanent life insurance.

It’s not a common practice yet, and it’s still heavily debated, but the process is an easy and understandable one. Best of all, it’s a safe practice.

Henry pays his annual fixed premiums. A portion of those premiums goes toward a pre-determined death benefit. The other part funds the cash value, which grows on a tax-deferred basis.

For the first scenario, let’s say Henry’s son decides to go to college.

Because Henry took out a life insurance policy, he now has cash value he can access to pay for college tuition. If Junior decides to drop out for any reason, Henry Sr. only “loses” the money he’s already paid for tuition. That’s it. If, while Junior is in college (let’s say at Indiana), his father passes away, Henry Jr. doesn't lose his college funding.

But let’s stay positive.

Let's say Henry Sr. is alive and well while his son attends college. During this time, he withdraws portions of the cash accumulation to pay the college tuition. The remaining portion continues to grow. And for those semesters Junior decides to take off for travel, Henry Sr. can leave the money alone to grow, use it to fund Junior’s travels, or spend it on himself.

The cost of a bachelor’s degree varies by state, type of school (private vs. public) and notoriety of said school (Stanford University will cost more than Sacramento State).

If Henry Jr. attends out-of-state Indiana University for an undergraduate degree, he’ll pay around $128,000 for tuition. That doesn’t even include residency, transportation, books and supplies. Add a graduate degree and a PhD and that could be another $50,000 in tuition.

That’s a hefty price tag.

Indiana Jones
Photo Credit: Flickr user Eurritimia (Used with Creative Commons license)

But college or not, living or gone, Henry Sr. can ensure the funds will be there, just in case.

See the six biggest benefits of using life insurance to fund a college-savings plan listed out by clicking here.