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As others have said - yes, it can be a great idea. No, you're not going to get an actual 7% return as there is a cost of insurance involved. It's nice in that it's non-correlating and paid up, they could have that policy for the rest of their lives just slowly growing without them thinking about it if you decide not to pull funds out for college. Having it not count against financial aid calculations can be helpful as well.
On the 529 plans though, don't get hung up on market crashes making all of your money disappear right before you need it. You can use what's called a Target Date Fund to maximize your growth potential early on then limit your market exposure as you get closer to the date you expect to start withdraws. While I'm not a fan of target date funds for things like retirement that can span several decades, they can make a lot of sense for for quick events such as going to college for 4 years. Not sure who the 529 sponsor is in your state so your options may be different, but here's what most of my clients use through American Funds for their 529 plans. https://www.americanfunds.com/individual/products/target-date-college-series.html
On the 529 plans though, don't get hung up on market crashes making all of your money disappear right before you need it. You can use what's called a Target Date Fund to maximize your growth potential early on then limit your market exposure as you get closer to the date you expect to start withdraws. While I'm not a fan of target date funds for things like retirement that can span several decades, they can make a lot of sense for for quick events such as going to college for 4 years. Not sure who the 529 sponsor is in your state so your options may be different, but here's what most of my clients use through American Funds for their 529 plans. https://www.americanfunds.com/individual/products/target-date-college-series.html