life insurance for my child

Should I Buy Life Insurance for My Child?

If you’re a parent (or a grandparent), deciding on whether to buy life insurance for your child is a thought that may have crossed your mind.

And if it has, let’s look at some of the specifics when it comes to life insurance for a child. First, life insurance policies for children are typically whole life insurance policies. These policies provide lifelong coverage as long as premiums are paid. The good news is that premiums tend to be guaranteed and won’t increase over time. Another benefit is that a portion of the premium goes towards building cash value. The child can use this cash for any reason while they are alive. 

A term life insurance policy, which provides coverage for only a certain amount of years, is not something you can buy for your child. 

What are the Benefits of Buying a Life Insurance Policy for a Child

Guarantees Insurability

There are plenty of good reasons to purchase a life insurance policy for your child. First and foremost, it guarantees insurability. What if your child develops a health condition later on in life? If they have a policy, you are ensuring coverage for your child. 

Affordable Rates

The older we get, the more our premiums increase. However, premiums for child life insurance are low. So when your child is young, it’s a perfect opportunity to buy life insurance at the most affordable rate your child may ever see; you’ll never get a lower rate on life insurance than when a child is a newborn. Although you or your child will be paying premiums over a more extended period of time, the amount paid can still be lower over time because of the very low rates for a child. 

Build Cash Value 

By gifting your child a policy that has accumulating cash value, they can borrow against it if ever needed. What if they need a down payment for a car or a house? Your child can take a low-interest loan from the policy, and it is tax-free. There is no credit check required because the collateral of the policy secures the loan. 

Medical Bills 

We always wish our children to live long and healthy lives; however, sometimes, that is not the case. If something should go wrong, expenses can be overwhelming. Many life insurance policies offer living benefits, which means money can be used in the case of a terminal or chronic health condition. You can use the money to pay for medical treatment and other related expenses. 

Give a Gift 

Often, parents or even grandparents purchase a life insurance policy for the child as a gift. If the child is young, when they reach adulthood, a policy with accumulating cash value can contain a large sum of money. Imagine how much the policy would be worth if the child held onto it until retirement. 

Final Expenses 

While the chances of a child passing are low, a life insurance policy would cover the funeral costs. This is not the only reason to purchase a policy, but it could help the family by paying off any car or school loans and allow the family to take time off of work to mourn.

How Much Coverage Does Your Child Need 

The question of how much coverage your child needs doesn’t have a direct answer. If you are buying child life insurance to cover final expenses, a rider policy on your insurance may be sufficient. For about $2.50 a month, you can add a rider to your existing life insurance policy, and that would give you about $10,000 to $15,000 worth of coverage. You can’t forget, though, that you will likely need time off of work after the loss of a child. Consider your sick and vacation time and whether you would need more time off. If so, a $50,000 policy may be best. 

If your family has a history of medical conditions such as diabetes, you may consider more coverage. Keep in mind that a more significant cash benefit could help cover any outstanding medical debt to include treatment and other medical costs. In addition, many whole and universal policies have the option to add living benefits to life insurance for children. This protection can help with treatment and other associated costs.

Things to Consider Before Buying Your Child a Life Insurance Policy 

It’s always best to make sure you have enough coverage for yourself before you buy a policy for your child. Remember that protecting the financial well-being of your loved ones should be a priority. You will find that many insurers require the parents to have their own policies with at least as much coverage before insuring a child. 

You want to make sure that you have an emergency fund built up, you are saving for retirement, and you are paying off high-interest debt before purchasing a life insurance policy for your child. 

Interested in Learning More About Buying Life Insurance for Your Child?

I understand it can be hard to think about something happening to your child and that life insurance may be needed. However, I can sit down with you and weigh the pros and cons of insuring your child. Remember, it can be a tremendous financial tool as your child enters adulthood. So call me today at (912) 660-5236, and we can discuss your options.