Meaning of Education Insurance
Long before a child is born, parents and grandparents alike start thinking about what their child’s future will look like. So that they can learn a great job or start studying, they often invest money in a savings plan and in this way give the children insurance for their education. Many parents are also thinking about training insurance. You can find out here whether or not training insurance is worthwhile.
- Education insurance is usually a combination of endowment life insurance and term life insurance.
- The duration is usually 20, a maximum of 25 years. The deal should take place as early as possible in order to achieve sensible savings.
- Insurance experts advise against taking out education insurance and recommend other investment options for children instead .
Children cost a lot of money
It is well known that children cost a lot of money, but how much does a degree actually cost, for example? The German Student Union has calculated the costs students have to reckon with if they decide on a course of study over six semesters with a bachelor’s degree – it is 60,000 euros.
Those who opt for a long course of study such as medicine or archeology have to dig deeper into their pockets. As a rule, these costs cannot be financed through part-time jobs alone; the parents usually add something. All parents who do not have the financial means to support their children in their studies are happy to take out training insurance and hope that the premiums they have paid in over the years will be enough to pay for their studies. But is education insurance really that efficient and is it worth it for parents to invest in this insurance?
Education insurance works like life insurance
Even if the benefits of a training insurance are very attractive at first glance, this insurance is not really new. Strictly speaking, training insurance is nothing more than classic endowment insurance , which is, however, often linked to the conclusion of term life insurance . Parents or grandparents who take out education insurance for their children or grandchildren pay – as with normal life insurance – a certain amount every month, which is then paid out at a certain point in time with interest. With education insurance, the child is always the beneficiary and can dispose of the money and use it, for example, to finance a degree.
When should training insurance be taken out?
If you decide to take out training insurance, you must, if possible, take it out when the child is born. Only if the insurance is taken out very early will there be enough time to save a considerable amount. As with classic life insurance, a period of 20 to 25 years is realistic for training insurance. However, 25 years is the upper limit, otherwise the training insurance will only be paid out when the degree has already been completed. Even if not all students manage to complete their studies in the normal time, a period of two decades is usually sufficient as a term for training insurance.
Term life insurance
Many insurers make it compulsory to take out term life insurance if you want to take out training insurance. There is a good reason for that. If something should happen to the parents as contributors to the education insurance, then the insurance would practically expire. In the event that the parents should die, the term life insurance takes effect, the children as surviving dependents then no longer have to worry about further contribution payments. But there is also the option of transferring the training insurance to the godparents or grandparents: If something happens to the parents, they then continue to pay into the insurance.
Is it worth taking out training insurance?
Insurance experts advise against taking out training insurance. They are of the opinion that education insurance costs a lot with a low return. Anyone who looks at the development of interest rates for life insurance in recent years will agree with the experts. In addition, it is difficult to compare the return because two types of insurance (endowment and term life insurance) are linked to one another. If you are looking for a safe alternative, you can take out a bank savings plan with rising interest rates. Investment savings offer more risk and more return .