People often ask us whether they should get life insurance for their child. Here are five reasons we think it's a good idea.
Some may frown on insurance for minors because of life insurance's primary purpose of replacing the income of a working adult. However, there are many other reasons why buying a life insurance policy for your child could be a good idea for you. Here are five:
Reason #1: The time and resources to grieve.
There is likely nothing more devastating than the loss of a child. In such an unfortunate and untimely event, day-to-day responsibilities might be overwhelming - the demands of your job, paying the bills, and having to care for other children in the household. The reality is you might not have enough paid sick or vacation time from work to take care of yourself, your spouse or your other children during this difficult time. If the unthinkable were to happen, would you have done enough financial planning to have the resources to go back to work on your terms?
Reason #2: Cash Value and living benefits.
The cash value earned from a permanent* life policy (such as whole life, universal and variable life) can be withdrawn or borrowed against, providing living benefits that can used by your child as he or she gets older for many things such as:
College tuition and expenses
Financing a vehicle
Paying for a wedding
Collateral for loans
Reason #3: They'll always be insured.
There are a number of factors that can affect your child's future insurability. High blood pressure, diabetes, obesity and cancer are just a few of the many health complications that might prevent your child from being insured down the road. One of the primary benefits of purchasing a life insurance policy when they are young is that they will always be covered regardless of their future health as long as premiums are being paid.
Reason #4: Guaranteed insurability.
Some life insurance policies for children come with an optional guaranteed insurability rider/endorsement that may be available for a nominal cost. As your child grows into an adult, this rider allows you to buy additional life insurance above the face value of the current policy (on specific dates and in certain increments) regardless of his/her health status at the time. Usually, the older the child gets, the fewer dates the policy owner has to purchase more life insurance under the rider. In some instances, after a certain age, the rider may not be exercised.
Reason #5: A locked-in rate.
Life insurance premiums for minors can be very affordable. Buying life insurance for your child now could give you an opportunity to lock in that rate for the life of the policy. As long as the required premium is paid, the policy will stay in force.
Policies vary greatly from company to company. A life insurance professional can help you select the right policy type and optional policy riders so your child will get the most out of their policy - even when he or she is grown with a family of their own.
*As long as required premium payments are timely made.
Loans against the policy accrue interest and decrease the death benefit and cash value by the amount of the outstanding loan and interest.