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Friday, October 7, 2011

Should You Buy Life Insurance for Your Kids?


Although life insurance was initially designed to provide a form of financial sustainability for the beneficiaries of an adult when that person passes away, many people feel it’s important to buy a life insurance policy for their children. Doing so is a matter of controversy. Some people feel it’s a perversion of the process, while others consider it a viable method of setting aside money for the child’s future. No matter which side of the question you come down on, there are advocates but seemingly no discernable consensus. 

Protection Against Future Physical Problems
There are definite benefits to having a life insurance policy for your children. One important reason is to protect the child against future debilitating diseases. If your child grows up happy and healthy, all well and good. All you’ve really lost is a little bit of money. But if your child is unfortunate enough to contract an illness that is ongoing and requires immense monetary expenditures, having a life insurance policy in place from the time they’re young will ensure the child will be taken care of. Before signing a life insurance policy for your child, make sure it states that the child can never be denied life insurance no matter what physical ailments they may develop. Medical problems, such as high blood pressure, diabetes, multiple dystrophy, and cancer, can strike anyone, anywhere, and without a policy in place the child could be denied life insurance coverage in the future.
Peace of Mind
As with any other type of insurance, getting a life insurance policy for your kids will provide you with peace of mind. The natural selection process tells us that a father and mother will usually not outlive their children. But there’s not guarantee it happen that way. If your child passes away due to an illness or an accident, the last thing you want to have to worry about is paying for a funeral. Having a life insurance policy in effect will ensure you won’t have to think about financial problems and can concentrate on taking care of the rest of the family.
A Form of Savings Account
Although it’s not designed to be used that way, a whole life policy purchased for your child when they’re very young can be worth a sizable chunk of change by the time they reach maturity. Some people use this method to set aside money for their child’s higher education. If you go this route, make sure you won’t be susceptible to hefty penalties for early withdrawal. You can avoid the penalties if you stipulate the money should become available when the child reaches 18 years of age before you sign a policy. Your insurance agent will probably be able to provide you with a number of options as to when the money could become accessible without financial penalties.
Relatively Inexpensive
If you get a life insurance policy for your kids, you won’t need to take out a million dollar policy, because, after all, they are just children--you’re won’t need to replace their income because they most likely don’t have one. A typical policy for kids could be somewhere in the $5,000 to $15,000 range, which means it would be relatively inexpensive to pay for. If you get a whole life policy, that cheap rate would be locked in for the duration of the policy, which means until the child dies or the policy is redeemed for cash.
Substitute Savings Plan
Some people say that buying a life insurance policy for a child is a good way to set aside money for their future. Others say they’d be better off putting that money in a 529 savings plan. Either way, the money accrued can be used for a college education. If you buy a life insurance policy for your child and don’t cash it in for college expenses, the accrued interest will continue to grow and will ultimately provide a hefty nest egg for the child. If you choose not to buy a life insurance policy for your child, but instead invest that money in a savings account of some sort, it will be available for the same purposes, and if the worst happens and the child dies, that investment money can be used for the burial.
Guest post from Payton Price. Payton writes about term life insurance quotes for TermLifeInsurance.org.

3 comments:

  1. When planning for retirement, be certain to take into account the issue of inheritance and legacy, especially if you have family and relatives. A legacy may be important to you since it highlights your values and what's most important to you. Seek the advice of an attorney or accountant to set up a bequest with a charitable annuity or a charitable trust that is separate from your estate wishes.

    financial planning for retirement

    ReplyDelete
  2. I like to impede out your blog a couple times a week in behalf of recent readings. I was wondering if you beget any other topics you indite about?
    Child Life Insurance

    ReplyDelete
  3. Peace of mind – that’s what life insurances are all about! We must keep in mind that nothing is constant in this life and the best thing that we can do is to invest financially to assure our children or loved ones of a good future ahead.

    -Hershel Duffey

    ReplyDelete

 

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