Insurance – a good choice to fund a child’s education?

Here's a quick quiz for parents and grandparents: How much will it cost to get your children or grandkids the post-secondary education that will give them the best start in life? And here's the quick answer: A lot … and getting even more expensive each year. In fact, a according to information from the Government of Canada's CanLearn website, by 2020 tuition alone for a four-year degree is expected to cost an estimated $40,327.

Those are daunting numbers but a post-secondary education is one of the best investments for future financial success. You know that – and it's why you have begun investing in Registered Education Savings Plans (RESPs). That's a good strategy -- the earnings accumulate tax-deferred while they are in the plan and the Canadian Education Savings Grant can add substantial ‘free' money to the RESP.

And there are also other strategies you can use that can make the difference between your children or grandchildren graduating debt-free or with a stack of student loans. Take life insurance, for instance. If you're like most people, you probably look at life insurance as basic financial protection for loved ones. But universal life insurance can also be a solid source of additional education savings.

A universal life policy is a combination of life insurance protection and investments. As the owner, you select a face amount of the life insurance, the type of coverage needed, and the name of the life insured – your child or grandchild, in this case. You pay the insurance premiums, which are usually quite low for a minor, and within certain limits you can make additional payments. Those additional dollars can be invested in a variety of investment funds to grow over the life of the policy on a tax-deferred basis – making this accumulation an important policy benefit. The policy can be made self-completing if it also includes adequate life insurance and disability premium waiver insurance on the life of the owner.

Dependant on the fund value of the policy, you may choose to stop paying premiums and transfer ownership of the policy to your child/grandchild after that person attains age 18. This is a tax-deferred transfer that gives your child/grandchild the ability to draw on the policy's cash values to pay university costs. And, since the policy is now owned by your child/grandchild, the taxable portion of any cash withdrawals is taxed at the usually lower marginal tax rate of the child.

For more information contact Kevin J. Zakus @ (250) 768-4546 or email

This column, written and published by Investors Group Financial Services Inc., is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice.