For many people, the idea of buying life insurance for children is taboo: no one wants to think about the death of their child. Despite the emotional nature of the subject, there are reasons for and benefits of buying children’s life insurance for both the child and the family.
Learn more about life insurance for kids to get the pros and cons of offering protection and building a financial asset for your children dependents.
Best Type of Life Insurance For Children
The type of insurance purchased for a child will depend on the ultimate goal sought by the parents. If the family simply wants financial protection in the future for potential medical costs, burial expenses and other incidentals which might surround the death of a child, the family should probably choose term life insurance for their kids.
These policies have no cash value and are relatively cheap insurance protection for a set period of time. Once the initial term expires, it can be changed into a renewable term policy or a type of permanent life insurance.
Whole Life Insurance
Whole life insurance, or a permanent policy, has an investment component which accrues cash value over time. A portion of the premium payments are diverted into the cash value which is invested by the insurance company. Some whole life policies offer a guaranteed return on investment.
These funds remain in a tax-free “savings” account until the time is right for your child to make use of them. Whether it is for education, college, travel, or a down payment for a house, whole life insurance for children is a good investment toward a real future, not a death.
Saving For College
Life insurance for children can be an important part of planning for the future. The cost of a college education is high and increasing, and student loans take years to pay off. Whole life insurance for a child can be used as a method to save for future expenses the child may incur.
Many families and parents with good intentions do not make regular deposits in savings accounts, but always pay insurance premiums on time. A whole life policy provides a nest egg for a child’s future education and college expenses.
Why Is Insurability Important?
Another reason for buying child life insurance is to give your kids a history of insurability. Some families have genetic pre-dispositions toward conditions such as diabetes and heart disease, which can be seen as pre-existing conditions by health and life insurance companies. Due to this, your family medical history could be used to exclude your kids from coverage.
A term or renewable term life policy will give the child a history of insurability, which is especially important if there is a family history of potentially exclusionary medical conditions. Term and renewable term life insurance quotes are quick and easy online, helping parents compare rates and coverage options to find the best available.
Cheap Premiums For Life
Some types of life insurance for children require that the policy be paid each month or each quarter to remain in effect. The rates are fixed and remain the same for the entire term period. A policy taken out on your son or daughter will have the same premiums for the life of the contract. Since premiums are much cheaper for children than adults, securing affordable premiums for life is one of the advantages of whole life coverage for a child.
Low Cost Loans
Most permanent or whole life insurance policies also allow insured families, parents, or children to secure a loan against up to 90% of the cash value. It isn’t necessary to redeem the cash value of the policy; you may simply borrow against it like collateral.
Typically these loans have very low interest charges and the policy remains in effect, although the death benefit is reduced by the amount outstanding on the loan. When the loan is repaid, the death benefit is fully restored.
Compare Life Insurance Quotes
Although term life insurance offers some advantages for children, permanent or whole life insurance policies can provide needed cash for college, interest free loans and cheap premiums when the child grows into an adult. Parents should review the costs and provisions of child life insurance to determine which one will best meet their needs and goals.