Should I Get Life Insurance on my Children?

By TE Cunningham

Engrained in being a parent is a need to protect your child – their health, well-being, and future are a constant in your life.

Probably the worst thing any parent will ever face is the loss of the child; it’s hardly imaginable. Yet, that’s exactly what you have to think about when considering whether or not to purchase life insurance on your children.

Most life insurance for children works as a type of permanent life insurance – whole life policies that function with a savings account referred to as cash value. This value grows slowly over time. The policy can then be transferred from the purchaser, typically a parent or grandparent, upon the child reaching adulthood.

You can also purchase term life for children, which lasts for a set period of years. This is accomplished by adding a small amount of coverage for your child to your term life insurance policy. This additional coverage expires when your policy does or when the child reaches adulthood, whichever occurs first.

Agent Crystal Decker states, “The younger your child is, the less expensive a life insurance policy will cost so it makes financial sense to start a policy for your child as early as possible. Most can take effect as early as 14 days from birth.”

Here are some reasons why you might want to consider it:

It provides a savings vehicle

  • It is a de facto savings account. The cash value grows slowly over many years and can be borrowed against if the need arises. The chase value is also tax-deferred. This could be a way to save for the child’s college, auto, first home and so forth. This can also make an excellent gift in a child’s very early years. Let’s be frank – your grandson doesn’t know what you bought him when he was one, but he will remember this gift for the rest of his life.
  • Purchasing the insurance locks in the child’s ability to qualify for more life insurance at a later date. By purchasing the coverage when they are young, you can ensure that they have some type of coverage is your child is diagnosed with an illness or disease that could affect his or her ability to secure it after the diagnosis. While a somewhat low risk, it is worth mentioning.
  • In the unthinkable situation of a child’s death, the payout could cover funeral costs, medical bills and such, leaving financial worry out of the mix of horrible emotions the grieving parents experience at that time.

Decker adds, “Another thing to think about when starting a life insurance policy on a child so young is to guarantee their future insurability, which is important. Let’s say your child develops a condition rendering him or her rated or declined. For example,” she explains, “my son Raleigh suffered from terrible migraines starting in the 1st grade. I did not have a life insurance policy on him so when he was in the 5th grade, the year I became an insurance agent, the first thing I did when I passed my life/health examine was to get policies on all my children. Raleigh was declined due to the amount and type of medications that he took to fight the migraines, medicines that he needed to try to live a halfway normal childhood. Once he was off the medications for 2 years they would re-evaluate his decline. I tried multiple companies and not one would insure him… I really regret not getting him a policy right after he was born or adding a child rider to my life insurance policy.”

Buying life insurance for your child should be just a part of an overall financial plan, not the be all end all in your savings plan for them, but it’s a great option to explore.

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