There’s no denying that, as a parent, you want the best for your child: good health, happiness and a productive and satisfying career. And one of the keys to achieving that future is education and training.
According to The College Payoff (a 2011 report from the Center on Education and the Workforce), “In 2002, a bachelor’s degree-holder could expect to earn 75% more over a lifetime than someone with only a high school diploma. Today, that premium is 84%.” According to the report, while on average a high school graduate can expect to earn $1.3 million over a lifetime, someone with a bachelor’s degree can expect a lifetime earning of $2.3 million, while those with graduate degrees can be even greater.
But a college education isn’t cheap. An article on Kiplinger.com cites a $28,500 average price tag for a year at a private nonprofit college—before adding extra costs such as room and board, books and other expenses. And thanks to inflation, these figures will only increase.
Not surprisingly, in addition to securing student loans on their own, many students rely on their parents for financial help. But what happens when the parents are no longer there to assist them? In Chezerea Ortiz’s situation, the loss of her father had, in her words, “crumbled the foundation of my family.” Not only did she have to bear the burden of her college expenses on her own, but she was also concerned about her younger brother’s future as well. You can see her story here.
Fortunately, as the 2011 grand prize recipient of the LIFE Lessons Scholarship Program, Chezerea (at right) was awarded $10,000 to help defray her college expenses. (You can read other LIFE Lessons scholarship recipients’ stories at www.lifehappens.org/scholarship-recipients)
And while she is grateful for the assistance, she also stressed how important it is “to be sure that the people who depend upon us will be able to take care of things when we are gone … Life insurance is really one of the few comforts that we can leave our families.”
Now ask yourself: what would happen to your child if you were gone? What kind of future could your child look forward to? Would he or she have to choose between forgoing career goals or incurring a massive student debt? If your answer to these questions is “I don’t know,” then you need to consider adding life and disability insurance policies to your portfolio.
While you hope to be there when your child graduates from college, the truth is there is no guarantee. Having a life insurance policy in place can help finance your child’s future education, even when you are no longer there to provide direct monetary aid.
Life insurance falls into two categories: term and permanent. Term life insurance is more affordable, but only provides protection for a specific time period (for example, a 20-year term) and generally pays a benefit only if you die during the term. This can be a good option if you have a need for coverage that will end at a specific point in time, such as when your last child graduates from college.
Permanent life insurance provides lifelong protection, accumulates cash value and pays the full face amount at death. Depending on the policy, you may also be able to take advantage of an accelerated death benefit in the case of a terminal illness, which allows you to draw some or all of the death benefit to handle current expenses, with the remainder provided to your beneficiaries upon your death.
While you may be funneling part of your earnings into a college fund for your child, what will happen if you are disabled and can’t work? You have a three in 10 chance of suffering a disabling illness or accident that keeps you out of work for 90 days or more during your career. What would happen if your paycheck were to stop? Would you have to tap into savings to make ends meet? And how would you continue to put money aside for your children’s education?
If you think you could rely on the government, think again. The average monthly benefit paid by Social Security Disability Insurance (SSDI) is a little over $1,100 a month, and most people who apply for benefits are initially denied. But if you have a disability insurance policy in place, you’ll receive an income if you are unable to work because of illness or injury, thereby helping to ensure that your plans for your child’s future can still become reality. To learn more about disability insurance, you can visit www.protectyourpaycheck.org.
While you may dream of the day when your cap-and-gowned son or daughter receives a diploma, make certain to keep your eyes wide open about the realities of the financial costs of higher education. By having a life insurance policy in place, supplemented by the additional security provided by disability insurance, you’ll be ensuring that your child’s future education is more than just a dream.