Graduating? Think Collateral Assignment and Life Insurance

Graduating

Life insurance is often the last thought for most high school graduates strolling up to the stage ready to shake hands and receive their prize. Ironically, it should and will be one of the first thoughts for most parents for sure! How are we ever going to afford college? We haven’t been able to save anywhere near enough money to pay for tuition without tapping into our retirement plans and taking a hit! Where do we go from here? Sound familiar? If not, it will.

As painful as that feeling can be, there really is a fairly easy solution to it in many circumstances: get a loan from your bank easier by taking out a life insurance policy on your young adult and signing a collateral assignment making the bank the beneficiary of the policy for a specific duration. The extent of the duration would obviously coincide with the length of the student loan and the duration of the loan to cover it.

A 15 or even 20 year term life policy at age 18 would be very inexpensive (see Pivot.com for an easy insurance calculator quote). Not only will the life insurance policy and collateral assignment leverage a student’s credit ratings to give them a better chance of obtaining the loan to begin with, but it may even “lock in” their insurability for possible convertibility of the term policy in the future.

In many ways it is a “win-win” situation for parents and all parties involved. For the parents, they don’t need to stress over not being able to fund all of their child’s education, and can feel confident that their child will have a better chance of obtaining a college loan even with a fledgling credit history through the collateral assignment. For some students they now have an opportunity to grow in fiscal responsibility and can take pride in knowing that they earned their degree through their own financial doing. The bank is happy because they get to make money off the loan and have the security of knowing that they will get paid even if the worst possible situation happens and the student passes prematurely.

Though the combination of collateral assignments and life insurance were often used for businesses just starting up, they can equally be useful for a growing working class that is taking on the financial burden of society, and who needs to look into other avenues to assist their families any way they can. So look into collateral assignment today for your young graduate who will surely benefit from a smart, frugal, and wise parent’s initiative. 

About the author: Kyle McDonald holds FIC, FICF, FSCP® & CLTC designations. His viewpoint on life insurance is simple, “Anyone with a family must have life insurance. In the end, life insurance is for others you care about, not you.” He is ready to help you and your family get the best option available. Contact Kyle today at   1-800-651-1953 or KMcDonald@Pivot.com.