Life Insurance for Children

life insurance for children

 You’ve no doubt seen commercials for child life insurance policies and may be wondering whether or not it is useful or appropriate to purchase one. We understand that death is a delicate issue, made even more sensitive when we bring our children into the discussion. Buying a child life insurance policy may be a wise financial decision, but you should base your choice on your family’s needs.

Consider the Purpose

If you are considering life insurance for your children, you should first ask yourself what you think the purpose of life insurance is. Would it be to cover funeral expenses if the absolute worst thing should happen? If so, you may want to consider adding a child protection rider to your own life insurance policy. Coverage can be purchased in units, usually at a nominal price. But remember, a child term rider on your policy will be temporary coverage, and most carriers cap this rider at about $10,000, which would likely fall short of paying for a child’s funeral.

What about buying a cash value policy that can double as a college fund? These policies will build cash value over time and can be surrendered over time in order to use the funds to help with college expenses, buying a car, or even a cash graduation gift. There are other strategies, like a 529 plan, that may be more effective, but they typically can only be used for one predetermined purpose. The cash value in a whole-life policy can be used for any purpose you’d like, and it would be your decision as the owner of the policy.


Transferring Ownership of the Policy

Many parents and grandparents purchase life insurance for their children or grandchildren when they are born, and then, at some point in time, they transfer the policy to the child so they can keep the policy for a lifetime. For example, let’s say you have two young children who are a couple of years apart, and you decide to buy a cash-value life insurance policy on them at an early age. You may have also decided to start a 529 college plan for each child since the life insurance is so inexpensive.

When your children reach college age, you can fund their education using the 529 plan and then transfer the insurance policy to them as well. Your children can then decide to cash the policy in to buy a car or for some other large purchase, or they can decide to keep the policy in force for final expenses in the event they should die unexpectedly.


Future Insurability Options


Another important reason why it may be a good idea to purchase life insurance for children is if there is a chance that they will not qualify for a policy as adults. If you have a family history of illnesses like hypertension or diabetes, it may be difficult for your child to find an affordable life insurance policy as he or she gets older.

In fact, some life insurance plans for children will include an option to increase the face amount at certain intervals without proof of insurability. This option could be a “lifesaver” for a child who develops a serious medical condition and cannot purchase insurance at affordable rates when they are older and need additional coverage.

The topic of health is relevant to the subject of insurance, as your health has a direct effect on your risk of mortality and, therefore, on your life insurance premiums.

Two of the biggest factors in determining health class are tobacco use and build (height/weight ratio). Smokers pay significantly more for their life insurance because it is proven that smoking directly (and indirectly) impacts your mortality. Overweight people have a higher risk of heart disease, some types of cancer, and diabetes, which all impact your mortality.

So, if your child, who is now an adult, takes up smoking and also becomes overweight, cannot qualify for affordable life insurance, that policy you purchased for your child when he or she was three years old will start looking like their only option to have affordable life insurance.


While we’re on the subject of Smoking and Weight


It’s easy to tell people to quit smoking and/or lose weight when you’ve never smoked or put on some additional weight. And by the way, talking about another person’s weight is never an easy subject to broach.

Since we, as individuals, can’t seem to handle these problems ourselves, the government (both Federal and Local) is stepping in to save the day. The City of San Francisco (as well as the County of Santa Clara, CA) is helping to ensure the future health of your children (and, consequently, ensuring better insurance health classes for them). The S.F. Board of Supervisors has voted (8-3) to prohibit restaurants from giving away toys with meals that don’t meet certain nutritional standards for calories, sodium, and fat. This idea is spreading to other local governments, so get ready to bid a fond adieu to, I’m happy to say, the Happy Meal.

The federal government, under the guise of the FDA, has decided that tobacco use has become an epidemic, especially with school-age children. As we apparently can’t stop ourselves (or our children), the FDA has devised a plan to scare us out of the habit. By placing pictures of diseased lungs and smokers with holes in their throats and other graphic images of smokers with diseased body parts, the Feds are going to scare us straight (or nicotine-free). Then, they’ll probably approve a drug for all the freaked-out nicotine-craving addicts, but maybe that should be a subject for another article.


Life Insurance for Children – Pros and Cons

You would think that buying an inexpensive cash-value life insurance policy for your children would be a no-brainer, but many parents and grandparents balk at the idea, and some are even unwilling even to discuss it. And insuring your children may not be the best investment under certain circumstances. As with any life insurance product, there are pros and cons depending on your circumstances.


Cash-value life insurance can serve two purposes. It can be a resource for the funds needed to pay for funeral and burial expenses. And, since the policy builds cash value over time, it acts as a savings vehicle that normally earns more interest than a savings account. In fact, the minimum interest paid is stated in the contract and guaranteed as long as the policy remains in force.


Some financial advisors believe that the fees associated with a life insurance policy considerably diminish the returns, and a policyholder could likely earn more if they invested the premium that is over and above the cost of insurance elsewhere. This sounds a lot like “by term and invest the rest.”


In the event your child dies unexpectedly, the life insurance policy would provide the funds needed to pay funeral expenses, counseling for surviving loved ones, and income for a parent who must take time off from work to grieve their loss.


Statistically, it’s very unlikely to lose a child before age 21. It may make more sense to regularly deposit money in a savings account that charges minimal or no fees.


Purchasing whole life insurance when a child is very young guarantees that they will have at least some coverage if they become ill in later years and cannot medically qualify for affordable life insurance.


Some financial advisors believe the risk to be far too remote, and the parent or grandparent has other options that require no fees to mitigate this risk.

Insurance Companies We Recommend

Mutual of Omaha 

Mutual of Omaha offers a children’s whole life insurance policy designed to provide lifelong protection and financial security. This product, known as “Children’s Whole Life Insurance,” is tailored specifically for children, offering coverage that remains in place for their entire lives as long as premiums are paid. 

One of the key features of this policy is its affordability; parents can secure coverage for their children at a low monthly cost, ensuring that they are protected without placing a significant financial burden on the family. Additionally, the policy includes a cash value component that grows over time, which can be borrowed against or used for future financial needs such as education or starting a business.

The application process for Mutual of Omaha’s children’s whole life insurance is straightforward and does not require a medical exam, making it accessible for most families. Coverage amounts range from $5,000 to $50,000, allowing parents to choose a plan that best suits their financial goals and the needs of their children. 

This policy also guarantees insurability, meaning that as long as the premiums are paid, the child will have life insurance coverage regardless of any future health issues. Mutual of Omaha’s strong financial stability and reputation for excellent customer service further enhance the appeal of their children’s life insurance product, providing parents with peace of mind knowing their child’s future is secure.

Gerber Life Insurance

Gerber Life Insurance Company offers the “Grow-Up® Plan,” a whole life insurance policy specifically designed for children. This policy is aimed at providing lifelong coverage and financial security for children, starting from as young as 14 days old up to 14 years of age.

One of the standout features of the Grow-Up® Plan is its affordability, with premiums starting at a low rate that remains the same throughout the life of the policy. The policy also builds cash value over time, which can be accessed through loans or withdrawals to help cover future expenses such as college tuition or other significant life events.

The Grow-Up® Plan is known for its guaranteed insurability, meaning that once the policy is in place, the child will always have life insurance coverage regardless of future health conditions. Additionally, at age 18, the coverage amount automatically doubles without an increase in premiums, providing even greater value.

 Gerber Life Insurance is renowned for its strong customer service and financial stability, giving parents confidence in their decision to invest in their child’s future through this policy. The Grow-Up® Plan not only offers peace of mind through lifelong coverage but also serves as a foundation for building financial security for children as they grow into adulthood.

Life Insurance for Children

Richard Reich
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