When mentioning life insurance on a child, a parent may completely shut down. Yet, getting a life insurance on a child could be one of the greatest gift you could give that child. You see, when it comes to life insurance on children, early death is not the only factor. As a matter of fact, considering the statistics on child death today, worrying that your child will pass away at a young age is very unlikely.
Five Main Reasons to Give Your Child Life Insurance
* Insurability – Probably the number one reason parents get a life insurance policy on their child is to protect their insurability. What this means is, at a young age most children have very good health. That allows children to qualify for the best possible rates and usually guarantee the approval rating for life (select or preferred…). For the purpose guaranteeing insurability, we recommend that you get the highest amount of insurance available at a price you can afford. You will find that a $100,000 policy is not much more expensive than a $50,000 policy. We also recommend that you utilize a 30 year term life insurance plan with rates guaranteed for the full 30 years. make sure that the term life policy is convertible and and ask about which plans you can convert to (this is often overlooked and yet very important). The main advantage of term life insurance is that it is provides the lowest rates on life insurance. If you are able to afford it, a universal life with rates guaranteed for life is an even better option. Select option B or 2 when applying. This will allow your child to selectively increase premiums later (to a limit) and at the same time increase coverage without having to requalify.
* Low Rate Cost Saved – When you buy a life insurance policy on your child, you have essentially locked in the low cost for a number of years (with term life) or for life with whole life and universal life. We have yet to find an upset adult who’s parents bought him/her life insurance as a child. The fact is, cost of life insurance increases dramatically as we get over age 25. Rates can get even much worse if the applicant has health issues (even minor ones)
* Easy to get – Most children’s life insurance policies do not require an exam even at higher amounts of coverage – such as $300,000. Although it would be difficult to justify a $300,000 policy on a child, a parent should have no problem getting a $100,000 policy.
* Genetics – I think that you may guess where this one is going. According to some research, if a parent is prone to certain health problems, the child of that parent is much more likely to develop these same health issues. As of today, insurance companies do not rate people for their genetic predispositions. They may not do it, but you can. In other words, if diabetes or certain cancers or other medical issues tend to be prevalent in your family tree, it would seem even more important to secure a life insurance on your child before he or she develops any indication that they have the same medical issues – Certainly before your child gets diagnosed as such. Even for some diseases which are not likely to appear until much later in life (young adults) by securing the insurance early, very low rates can be guaranteed for life.
* Saving for future expenses – That is probably the most controversial reason to get your child life insurance. And for good reasons! I will keep this simple with a question. Do you save for your child’s college education? No! Well, you are like most people. Yes, it would probably be best to put money into mutual funds to build a college fund for your child, but, as with most people, if you are not going to do it, then a whole life or universal life is best. Besides, a child, who has reached the age of majority, is more likely to empty out a mutual fund account than a life insurance cash value account. The simple reason is that a child does not readily think of the cash value aspect of life insurance. This one is your choice. Make a wise financial as well as logical decision.
Term Life, Whole Life or Universal Life
We have written other articles on the benefits of whole life as opposed to term. For children, though, it is simpler. Get whole life or universal life at ages 0 to 16 or get term life above that age. Please go to our other articles for more details.
Reasons not to Get Life Insurance on Your Child
If there are reasons to get something then there are always reasons not to get it. In this case, the reasons are as follows
* Investment Value – Whole life and universal life are not the greatest asset builder. So if you are well organized and have the time for a master financial plan, then do not get whole life or universal life. You may want to consider term life for reasons we mentioned above.
* Health History & Health Habits – So not only do you have amazing genetics, but you also take care of your health and teach your kids to do the same. Yes, statistically there is a very high probability that your child will live many years before he/she develops any health issues. Which makes all reasons to get life insurance for a child valueless (aka: No Good).
Points to Remember
* You cannot get insurance on a child who is not a minor without their consent.
* Do not lie on your child’s life insurance application. If there are health issues or other problems, make sure to tell the insurance company. If the fraud is discovered, then you may not only damage your records but your child’s records too.
* Get life insurance on your self first. If you die, while the children depend on you, then whatever you got for them will be meaningless.
* Insure your spouse before your children
* save for retirement before you save for your children
* Take care to make sure that your other insurance policies are adequate before buying your child or grandchild a life insurance policy
* Beware of accident only insurance policies. That is not what you want!!!
Well, we hope this article gave you a good head start on selecting the right insurance policy or not selecting any policies at all. As we say in all of our articles always ask, ask and ask more questions before you apply and review your new policy carefully. Feel free to ask us too. Be well.
About the author
Philippe Deray – About the Author:
Philippe Deray is President and CEO of MCD Financial Services and MCD Life. Our web site address is http://www.mcdlife.com/life_insurance/children_life_insurance/life_insurance_for_children.htm
MCD Life is a successful, dynamic company built on the principal of serving our customers FIRST! Our primary mission is to bring peace of mind to our clients by offering innovative, value-added products and information that place emphasis on short and