The best-kept secret in American education is out.

Why might kids need life insurance? For all kinds of reasons.
It might seem strange, but kids might need life insurance. There are at least three reasons.

First, you can use it to generate income for college that grows tax-free, and that you don’t have to declare on the federal government’s FAFSA form (Free Application for Federal Student Aid).

Second, term insurance helps you protect your biggest assets in your life, like your home, so that you can always put a roof over your child’s head.
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Third, you can insure kids who have a disability or medical or genetic condition, like Down’s Syndrome or Autism. It’s protection as well as a death benefit up to the age of 120.  
What are a child’s options for paying for college?
You basically have two options to pay for college: get aid or pay cash.
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You can get a student loan or you can fill out the Free Application for Federal Student Aid (FAFSA) to see if you qualify for needs-based scholarships. Of course, there’s always merit scholarships, too. You can also fill out the CSS Profile, which gives an even more clear picture of your financial situation. These are all ways to get a kind of “aid” from someone else.
So, what’s this about life insurance-based savings plans?
The two main types of college savings plans are 529 Plans and Indexed Universal Life (IUL).

We’re going to talk about IUL plans for a minute. For starters, they have the same tax-advantaged distribution and limited downside risk as 529 plans, but they also include a few other benefits.
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One huge advantage of IUL plans is that they are not counted in the FAFSA—meaning any assets in an IUL account do not count toward your overall wealth, and are not taken under consideration by the algorithms that are supposed to designate your child as needing financial aid or not needing it. Your child can use the IUL policy and still get financial aid.

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SOURCE: “3 Reasons to Consider Indexed Universal Life as a College Savings Vehicle.” Carstens Financial Group. Accessed April 3, 2018. http://www.kcarstens.com/1/post/2016/11/3-reasons-to-consider-indexed-universal-life-as-a-college-savings-vehicle.html