Children’s Life Insurance: Is it Worth the Cost?
Life insurance policies can benefit a variety of clients—from middle-aged parents to single adults in their 20s. And in some cases, it can even benefit kids. Many insurance carriers offer children’s life insurance coverage to parents and guardians, who then hold onto those policies until the children in question come of age. Let’s consider why you should or should not insure minors so you can decide what’s best for your family.
One of the best reasons to purchase children’s life insurance is to guarantee your son or daughter’s coverage. If you buy a policy when your child is small, they can get approved without a medical exam. And they will stay approved, even if they later develop a medical condition that could otherwise disqualify them from coverage. Then, once they’re older, your child will have the option to purchase additional insurance regardless of their health status.
Insurance carriers don’t sell term policies for children. This protection only comes as permanent coverage, which includes a cash value account. As you pay the premiums, that cash value will grow, and your child will one day have the option to surrender the policy in exchange for a payout. The money could help them cover future expenses like college tuition or a home down payment.
A cash value account is tax-deferred, meaning your child won’t pay taxes on it until they withdraw the funds. But it also grows very slowly, so it may not offer the best returns. You should talk to a licensed financial planner before using a children’s life insurance policy as an investment opportunity.
It’s a horrible thought, but there’s always a chance a child could die. In that event, a children’s life insurance policy will cover costs such as funeral expenses and grief counseling. So, it can ease some stress during a tragic time.
However, death benefits for children’s life insurance are often much lower than those written into adult policies—often amounting to $50,000 or less. Plus, it’s not likely your young son or daughter will pass away, so you should consider whether death benefits are worth the premiums.
Children’s life insurance isn’t for everyone, but it has benefits in some cases. Call a Hibbs agent if you have any questions about this coverage or want to add a rider to your own life insurance policy that covers your children.