Grandparents can purchase life insurance for the new grandchild as a way to save for college expenses. One of the benefits of buying a juvenile life insurance policy is that you can give your grandchild the ability to be insured as an adult. Most juvenile policies guarantee adult coverage as long as the premium is paid, regardless of your grandchild’s health. Many of these build a cash value over time.
Recent studies say that as late as two years out of college, more than half of college graduates still rely on their parents financially. So as many Baby Boomer parents help their children and save for their own retirement, grandparents are saving and planning for their grandchildren’s college education with life insurance.
According to a Fidelity survey, grandparents report a median of $25,000 with 35 percent expecting to contribute $50,000 or more. Ninety percent report they would be likely, if asked, to make a contribution to their grandchild’s college savings fund.
The study indicates that many grandparents value a college education and consider it an important component to providing young people with the best opportunity to succeed. They also recognize that as the cost of college continues to rise, parents and grandchildren face a big challenge in saving enough to cover costs, and that without help their grandchildren could face a significant financial burden after they graduate.
“For many families, saving for college has become a team effort, and many grandparents aren’t content to sit on the sidelines,” said Keith Bernhardt, vice president of college planning at Fidelity.
“Contributions from grandparents – big or small – can add up over time and potentially open up a grandchild’s opportunities when making college decisions. Ongoing communication between parents and grandparents can help when determining how to grow their savings, as well as how to best leverage those savings to pay for college when the time comes.”
You don’t have to name yourself as the beneficiary. Parents can be the beneficiary of the children.
Grandparents own the policy while the grandchild is a minor. When the child turns 21, generally you turn the ownership over to the grandchild though some policies allow exceptions. Some juvenile term policies protect the child until age 25.
The policy does expire at the specific age, but many life insurance companies allow you to convert to a whole life policy.