How to insure your children’s education
If you are a parent, you may already be saving for your children’s education, possibly through a Registered Education Savings Plan (RESP). But what if the worst happens and you aren’t there to make the contributions? Life insurance protection helps to ensure that your children’s education costs can be covered, even if something should happen to you or your spouse.
Protecting a child’s prospects
If you are worried about your child’s prospects of getting a good job in an increasingly competitive global environment, you are not alone. More than ever, parents now realize that educated Canadians are more likely to be employed in a full-time job and have higher incomes. For example, one in four (24.1%) of those who held a university degree were in the top 10% in earnings in 2010.1
However, the cost of education continues to rise. For the 2011/2012 school year, the average cost of tuition alone at a Canadian university was $5,366.2 If your child will be entering first-year university in 2031, and education expenses rise by 4% annually, a four-year undergraduate degree could cost almost $43,000 — and that’s just for tuition.
Once you factor in accommodation, books, food, transportation and other costs, the amount is considerably higher. Those totals increase even more if your child plans to enter an advanced program, such as law, medicine or graduate school, or to study outside the country.
Knowing that investments in their children’s education are likely to pay off, more parents are putting away ever larger sums to pay for it. For example, Registered Education Savings Plan (RESPs) contributions rose to $3.7 billion in 2012, compared with $3.44 billion in 2010.3
Simply setting up funding for your child’s education is not enough. You need to make sure that contributions can be fulfilled even if you or your spouse should pass away. That’s where life insurance can help. It’s a convenient, cost-effective way to ensure that your children’s education expenses are covered, even if you are no longer around.
Choosing coverage to meet your needs
There are several different life insurance solutions available to provide the protection you need:
- Term insurance. Depending on your child’s age, you could purchase a 10- or 20-year term policy with coverage equal to the projected cost of your child’s education. This coverage would run roughly in parallel to the years in which you save for your child’s education (including contributing to an RESP).
- Permanent insurance. If you need permanent life insurance, an alternate strategy would be to increase your coverage, based on your projected education funding requirements.
How I can help
Whether you are thinking of setting up an RESP for your child, you already have one, or you’re saving outside an RESP, I can help determine the amount and type of coverage needed to protect your child’s future education.