Education and Insurance

LIFE assurance can be applied to provide the cost of education in a variety of ways. The least expensive and the latest policy for this purpose is one which guarantees that if the parent dies before a child's education is finished, the insurance company pays the rest of the school fees. If no claim is made under the policy, no part of the premiums paid is returned. This is strictly akin to fire insurance, a claim being paid if, and only if, the event insured against happens. Sometimes a child's education may have to be curtailed, or is rendered inferior, because, after the death of its parent, the necessary funds may not be available. Even if this does not happen, the provision of the money may be a strain on slender resources, and the cost of insurance is so small that it seems a pity not to obtain the protection.

At a considerably greater cost, the expenses of education can be paid for in advance by means of what are called " Educational Endowments," which should be taken out as soon as possible after the child's birth, and should mature for payment, it may be by instalments spread over three, five, or seven years, while the cost for school or college fees is greatest. These policies are mere savings bank business, and premiums have to be paid for the whole of the endowment period if the full benefit of the policy is to be obtained.

In the vast majority of cases the best way of providing for the expenses of education by easy instalments is to take Endowment Assurance on the life of one of the parents, or of some other person who may be willing to incur the expense. Under these policies, the remission of Income Tax is allowed to the extent of 2s. in the £ of the premiums paid. Thus the State, in effect, pays one-tenth of the cost.

As a concrete example we may take the case of a man aged thirty who pays £25 18s. a year for thirteen years, or a total sum of £337. The policy has a cash value at the end of thirteen years which will provide £100 a year for five years, or £500 in all. In this case :-

He pays .. .. .. .. .. .. £337 He gains • • .. .. .. .. •• £163

He gets

••

.. £500

The cash cost of the child's education is reduced by one- third, and becomes £25 18s. a year for thirteen years, instead

of £100 a year for five years. To a vast number of peOple such payment is a convenient arrangement, and for every- one it is a far more economical plan than meeting out of income the costs of education while they are being incurred.

The approximate net cost of providing £100 at the end of the endowment period is as follows :—

Endowment period.

E 8.- £ s.

-10 years

••: ••

7 16 7 18 8 1 12 „

••

• •

6 3 6 4 6 8 14 „

••

4 19 5 1 5 4 16 „

••

•• •• •• ••

4 2 4 4 4 8

A Life Office will, if desired, pay by instalments the amount due at the end of the endowment period, allowing interest on the unpaid balance. A sum of £290 will provide £100 a year for three years ; £467 produces £100 a year for five years, and £633 yields £100 a year for seven years.

If the parent dies within the endowment period the original sum assured, and bonuses in addition, become due at his death. But a Life Office will, if desired, allow the amount to accumulate at compound interest, and pay it -when it is needed. The premiums cease at the parent's death, if within the endowment period. This is by far the surest and most profitable way of making provision for education. However wealthy a parent may be, he can reduce the cost of education by about one-third, which is at least an advantage to any-. body. To many the reduced cost of this most legitimate of all " Easy Payment " systems is a great boon. It makes sure of education, even if the parent dies prematurely.

Many people leave the problem of providing for education until too late to take the fullest advantage of these policies. The sensible thing is to take out a suitable Endowment Assurance policy as soon as each child is born. Ago at Entry.

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