قالب وردپرس درنا توس
Home / Insurance / Should you buy life insurance for children?

Should you buy life insurance for children?

Is buying life insurance for your children a smart financial move? Here’s what you need to know about your options for your children.

Every parent wants to protect their children. So it makes sense that they would consider taking out life insurance for their children. But that may not be the most appropriate financial move in this situation. The primary purpose of buying life insurance is the need for a death benefit. For example, as a means of providing financial protection for the relatives named as beneficiaries if the breadwinner passes away unexpectedly.

Before you become a child life insurance policyholder, find out what two Certified Financial Planner™ professionals have to say about buying life insurance for children – and ask yourself if it’s really worth it, or if there might be other ways to help to ensure your child has the financial resources they need to succeed in the future.

In this article:

The purpose of life insurance

The biggest reason to buy life insurance is to financially protect the people you leave behind. While parents may face unexpected expenses after the death of a child, including funeral costs, there is less concern about how the household will fare financially.

“Although parents and others will suffer an extreme emotional loss in the case of losing a child, there will not be a significant financial loss of income or salary to replace,” explains Kayse Kress, CFP® professional with Physician Wealth Services. “Typically, the cost of living for the family will decrease and they may be able to cover the final expenses needed without significantly affecting their savings.”

Kress suggests that when parents are considering how much life insurance to buy and whether to take out life insurance for a dependent child, they should look at it in the context of wage compensation.

Why some parents buy life insurance for their children

Parents who purchase life insurance for a child, including term life insurance, are often motivated by the thought of providing for their children in the future. This is because many life insurance companies advertise youth life policies with a focus on the cash accumulation feature. While some parents may choose whole life insurance, others may prefer whole or universal life insurance, which provides permanent coverage.

“Most life insurance policies for children are whole life policies that have a cash value component that can be borrowed against,” notes Joel Ohman, CFP® professional and founder of InsuranceProviders.com. “Many new parents are quick to purchase life insurance for their child because of the built-in cash accumulation component of many of these types of policies.”

In other words: If you buy permanent life insurance for your child, you will be able to borrow against that insurance in the future. Some parents see whole life insurance or universal life insurance (both of which are permanent life insurance) as a method for college savings or a way to protect against medical bills. After all, they can always borrow against the policy’s cash value.

Ohman says buying life insurance for a child isn’t the best way to save for college. He reminds us that parents who put money into life insurance premiums for a dependent child can put the same money into their own pension. “At first glance, it may seem like the child’s college education should be the priority, but parents would do well to remember that there are many more avenues for a child to enter college (scholarships, grants, student loans, self-pay, etc. . . . ) than that there are ways to have enough money in retirement.”

Another reason parents buy life insurance for their children is to make sure their child will have life insurance in the future, regardless of what happens to the child’s health. As Kress puts it: “People buy life insurance for their children to protect against an illness or future diagnoses that could make insurance more expensive or worse, leave your child uninsured.”

However, it is not always a wise decision. Parents who are concerned that their children cannot prove insurability as adults may find that their child’s life insurance was unnecessary once the child was grown. “You can be left paying very high premium costs for many years only to find that your child may or may not be able to continue with the policy or can get their own policy at a cheaper cost,” Kress explains.

Alternatives to buying life insurance for children

When you are looking for the best life insurance policy, you will find that there are many alternatives to buying life insurance for your children. If you view life insurance as an accumulation vehicle, you can always open a traditional bank savings account instead. If you’re specifically hoping to save for college expenses, a 529 plan, an investment account designed specifically to help pay for education, is an option worth considering.

If you’re worried about your child’s future insurability, remember that there are many life insurance options available for adults and your child may have an easier time finding affordable life insurance than you realize. Kress notes that buying youth life insurance for insurance reasons “is not our preferred planning strategy because it’s impossible to predict.”

If you want to insure your child, consider adding a child rider to a life insurance policy. A child term rider will provide a death benefit to cover expenses following the death of a child, which can help families who may be struggling to cover funeral costs. Life insurance riders are generally cheap, especially compared to whole life insurance, and they’re not just for kids – a guaranteed insurance rider, for example, allows you to buy additional life insurance amounts at certain times in the future and provide a larger death benefit for your beneficiaries. (Note: Riders may be available at an additional cost, or may have fees when trained. Certain conditions will apply to each rider).

Because the person who really needs life insurance coverage isn’t your child—it’s you. As Ohman puts it: “The better insurance product to buy is life insurance for the parents’ lives, not the child’s!” Your family will be the ones dealing with lost income and funeral expenses, and affordable life insurance can provide your beneficiaries with much-needed financial protection in the event of your death. Compare life insurance quotes and find a plan that fits both your budget and your family’s needs.

Our editorial policy

Haven Life is a customer-centric life insurance agency supported and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe that navigating life insurance decisions, your personal finances and overall well-being can be refreshingly simple.

Our editorial policy

Haven Life is a customer-centric life insurance agency supported and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe that navigating life insurance decisions, your personal finances and overall well-being can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less difficult if they fit your situation.

Haven Life is not authorized to provide tax, legal or investment advice. This material is not intended to provide and should not be used for tax, legal or investment advice. Individuals are encouraged to obtain advice from their own tax or legal advisor.

Our disclosures

Haven Term is a term life insurance policy (DTC and ICC17DTC in some states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in some states, including NC) issued by CM Life Insurance Company, Enfield, CT 06082. Police and driver form numbers and features may vary by state and may not be available in all states. Our agency license number in California is OK71922 and in Arkansas 100139527.

MassMutual is rated by AM Best Company as A++ (Superior; Top category of 15). The rating is valid from 1 April 2020 and is subject to change. MassMutual has received different ratings from other credit rating agencies.

Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The driver is not available in all states and is subject to change at any time. Neither Haven Life nor MassMutual is responsible for the provision of the benefits and services made available under the Plus Rider, which are provided by third party providers (partners). For more information about Haven Life Plus, visit: https://havenlife.com/plus

You may also like

  • Stock photo of two African-American colleagues using tablet and laptop in the office.
  • An elderly, retired couple hold arms, grinning and laughing, as they stand by a lake
  • Happy mother holding her daughter up in the air

Get our most read stories, twice a month

  • My experience with Haven Life has been nothing short of amazing from start to finish. After working tirelessly with brokers and receiving quotes that were complicated to understand online, I found Haven Life and I’m very glad I did. Haven Life’s respectful and understanding approach to issuing something as important as life insurance and doing it in such an easy way is why I would recommend Haven Life to both my loved ones and friends.

  • Excellent and very intuitive experience! Highly recommended!

  • The application was easy and got a big approval for life insurance without a medical exam within 48 hours. Good follow up and easy process.

  • Easy Breezy Wanted to get this done for a while and this was the easiest experience I could find. I feel good knowing there is some protection for my husband and likely dogs.

  • It was an easy process. The turnaround was also doable.

Source link