Life insurance for children

Life insurance for children has become an enormously popular gift in financial planning.

Parents purchase life insurance for their children, and grandparents buy life insurance for their grandchildren.

Why life insurance for children?

The reason is simple: no other financial tool has the potential to save the children as much money over their lifetime, as does life insurance! A policy purchased on a child or teen can lock in a very low premium, and stay guaranteed at that rate for life.

People that have had to purchase life insurance in their adult years know how high the cost can be - especially if they've been treated for an illness. Even common conditions such as mild depression or diabetes can significantly increase the cost.

This problem can be avoided by putting coverage in force on the child as an infant, grade-schooler or teenager. The financial benefits are clear.

Teaching life insurance to children

What is interesting to me is the difficulty some people have in communicating the value of this gift to the children. It is, after all, a sensitive topic, and one that requires some deeper thought about caring for loved ones.

To help educate the children, I actually make a little speech when the application is signed. (Infants usually sleep through it, but some do seem to enjoy it. Surprisingly, teens find it to be cool!)

It's a bit mushy but it definitely gets the message across. And the adult family member who's sponsoring the plan really appreciates it.

Getting Life Insurance for Children

The application process is trouble-free for the child. If old enough, he or she signs the application; if not, no signature is required.

A medical exam is not needed.

The parent or other adult family member pays the premium, and then at some point hands over that responsibility when the child matures. It's that easy.

Amount

Generally speaking, the amount of insurance on the child can not exceed the amount of insurance already in force on one parent.

Whole life for children

While adults will chose between term insurance and permanent insurance depending on their need, whole life insurance is the preferred choice for children. This is because - in addition to the low guaranteed premium, locked in for life - whole life provides a guaranteed cash value, a non-guaranteed cash accumulation, and the option to increase the survivor benefit if desired.

As a matter of fact, with a strong company that can pay dividends on a regular basis, the non-guaranteed cash accumulation can be very significant over time. The life insurance policy can become a valuable source of cash for the child later in life. The down payment for a mortgage, a business loan, or funds for an emergency can all come from the life insurance.

Universal life for children

If the premium payer would like to spend less on the premium - and get a smaller cash build-up - then universal life could be used. With the life-long guarantees now available in these products, the premium could still be guaranteed to never increase, and the face amount could also be guaranteed to never decrease. And, the premium payment schedule could be made flexible, tailored to cash flow.

Best wishes for health and success,

Steve Kobrin