Life Insurance for Children
Undoubtedly, you might have seen children’s life insurance commercials and ponder whether it is appropriate to purchase for your children. Death is a delicate subject for us, and it becomes even more when we bring children into it. It might be wise to buy life insurance for the child, but the policy must be based on your family’s needs.
The Purpose of Life Insurance for Children
Before you consider buying life insurance for your child, you should consider what you think is the purpose of child life insurance. You want to purchase a child insurance policy to cover the funeral expenses in the worst scenario. If so, you must consider the child protection rider policy in your life insurance policy. You can buy a policy at nominal rates in units. But, remember, if you add term rider policy into your own, it is a temporary solution where carriers cap riders are usually at $10,000, which is not enough to cover a child’s funeral.
Another option is to buy a cash value policy to give you a return as a college fund. Such policies build your cash value over time, and when surrendered, you can use the funds to cover college fees, buy a car or even buy a graduation gift. Other policies are available, such as the 529 plan, but such policies are set for a predetermined goal. As the policy owner, you can use the cash value of the policy for any purpose.
Changing Ownership of the Policy
Usually, people purchase a life insurance policy for their children or grandchildren when they are born and later transfer it to the child. So, they keep the policy for a lifetime and build cash value on their policy. For instance, you have a five-year-old child, and you decide to purchase a life insurance policy and a 529 college plan since it’s inexpensive.
Thus, when your child goes to college, you can use a 529 plan to fund their college and transfer the insurance policy. Now it’s up to children to buy a car from the cash value or decide to keep the policy to cover funeral expenses in case of unexpected death.
Ensuring Future Eligibility Options
One reason to buy life insurance for children is to ensure they have an insurance policy if they didn’t qualify for an adults’ policy. For instance, if you have a family history of any disease or illness, there is a possibility your child won’t qualify for the life insurance policy as they get older.
Few life insurance policies also provide options to upgrade insurance policy value at certain levels without any proof. Hence, this can be a lifesaver for children if they develop severe medical conditions as they get older and can’t qualify for an affordable insurance policy. As the subject of insurance is relevant to your health, your health is directly related to the risk of your existence; and ultimately with insurance premiums.
In case your child develops the habit of smoking or becomes overweight, not qualifying for the inexpensive insurance policy. The policy you purchased when he or she was a child will be their last option for having affordable life insurance.
Pros of Purchasing Life Insurance for Children
Life insurance for children serves two purposes. First, in case of an unexpected death, it will cover the funeral expenses. Second, the policy builds cash value over time; usually, it acts as a saving vehicle that earns interest more than a bank’s savings account.
In case of a child’s unexpected death, the child insurance policy will provide coverage for the funeral and burial expenses, along with providing income for parents if they want to take off from work to grieve for their loss.
Having life insurance for a child guarantees that they will have at least some kind of insurance if they develop severe illness later in their life because they might not qualify for the inexpensive life insurance policy.
