A child savings plan, or index universal life insurance, is a policy that earns interest based on a fixed rate or an interest rate based on an equity or bond index. With this coverage you will earn interest when the market increases, but will not risk anything when the market decreases. The policy also has a living benefit, which you or your child can use at any time, as well as a death benefit to be used when your child passes away.
Another benefit to this policy is that the taxes on the interest are deferred until you or your child begin to use the living benefit. No income tax payment is required on the money that is withdrawn from the policy. The premiums and benefits are flexible, so you can get a plan that’s perfect for you and your family.
Many people use 529 accounts as a child savings plan, but they don’t realize that there are many restrictions and risks involved with those plans. With a 529, you have to use the money for education purposes only, and you’re penalized if the money is used for anything else. Index universal life plans don’t have any restrictions on what you can use the money for and you can access the cash value whenever you’d like.
Some 529 plans are not risk free; you could lose some of your money if the market decreases. Because index universal life does not have any market risk, you won’t have to worry about losing your child’s education funds. Most 529 plans can’t guarantee that you won’t lose any money or that you won’t be penalized.
To learn more about index universal life insurance as a child savings plan, fill out the form to the right or call us at 855-460-0746 today. A knowledgeable insurance agent will contact you to give you your free quote and help you find a savings plan that’s right for you.
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