Life insurance for children may sound CRAZY…but I think it’s a great purchase.
Bet you’re thinking it’s because I’m a life insurance agent looking to expand my market. NOPE! I can say that with complete confidence.
Life is not as simple and straightforward as all we would like it to be. It’s got a direction of its own and sometimes it doesn’t fit in with the plans we lay.
So let’s say you give birth to a perfectly healthy, happy baby. Life is good. The thing is, no setback rears its head immediately and health concerns often are revealed as time moves forward.
This is one of the best reasons to consider life insurance for children and I’m going to show you why right now.
So Why Do I Care?
My name is James Heidebrecht and I’m the owner of Policy Architects. Although that’s my day job – my real role in life is Dad and Husband. Let’s be honest most of us go to our jobs to be able to afford a better future for our loved ones and I’m no different.
Life insurance for children holds a special place in my heart because of my stepson. He was diagnosed with ADHD when he was 7 years old, but prior to that, he had no “serious” medical issues that would impact his life. When we applied for health insurance our agent asked us a battery of questions and then issued our policy…with one caveat.
All of our medical situations are covered EXCEPT for issues connected to his ADHD treatment and diagnosis. Ouch!
Then it dawned on me. His situation may impact his ability to get affordable life insurance in the future. Had we known this, life insurance for children would have become a bigger issue for us when we got our coverage in place.
Life Insurance for Children & How It Can Help You & Your Family
I think a lot of people see ads for life insurance for children and think it’s truly morbid. I get that completely and if I’m 100% candid I had some of those thoughts myself. After all, life insurance is a business and I would be insincere to say otherwise. But there is always the yin with the yang.
Life insurance is a terrific safety net and this is no different for children. There are a number of terrific ways it can be used to help you and family avoid sticky financial situations. So let’s take a deeper look into this right now.
1. Life Insurance for Children Can Prevent a Financial Tailspin If a Death Occurs
Well this is the part of the article that NO ONE wants to talk about and I don’t blame them. We aren’t supposed to outlive our kids and those parents who go through this sort of tragedy are in my thoughts. I can’t imagine how difficult it would be to experience this kind of loss as a parent and overcome it. In fact, many families are so damaged they fall apart emotionally and financially.
The worst part? Funerals cost serious cash. So imagine you sustain medical bills, unimaginable mental distress and now you have to pay thousands for burying your child. Life insurance protects you from this.
It’s also incredibly affordable. So it’s not like you have to shell out tons of money for this sort of protection. The monthly premiums you pay are based on risk. A young healthy baby isn’t likely to die so the cost to you is minimal.
2. Loss of Income
No one wants to talk about this…but if you lose a child, it’s likely going to impact your income. You’re not off work for just 2 days or even just two weeks. I’ve heard stories about parents losing children taking off 6 months minimum – only to return part-time.
This is very charged subject matter but as far as I’m concerned, it needs to be addressed. Having life insurance on your children makes strong sense financially. It’s really not a choice any of us wants to make. But having no insurance means you are back at work before you’re really ready. This protection replaces your income while you spend the kind of time you need to grieve and take care of your family.
So with this out of the way - I can get into the meat of why I particularly love life insurance for children.
3. Life Insurance for Children - Guaranteeing Future Insurability
As I mentioned above, one of the biggest perks of buying life insurance when you are young and healthy is the cost. Sadly more people than not come to me for coverage when they are worried about their health.
Yes, unfortunately this is true.
An accident or a medical issue is diagnosed and they’re suddenly forced to think about the impermanence of their lives. Sure this is something that we all face – but feeling unwell really knocks that point home. So as the veil of denial lifts people start to plan for their inevitable exit. Cue – a call to an independent life insurance agent.
The problem? Now their rates are sky-high – or worse yet they are not eligible for a traditionally underwritten policy which means guaranteed issue is their only option. IF they can afford it. Sigh.
4. Preparing for the Future!
There is no guarantee you anyone will be eligible for insurance down the line.
If you want an underwritten policy you have to go through all the hoops to get it. The drill is you answer a battery of questions, get a physical and then an underwriter reviews the results, your answers, and your medical files before issuing you a rating. This rating determines how much you pay for life insurance.
The good news is most people are healthier than they think. That being said, the healthier you are when you apply the cheaper the rates.
This is where life insurance for children really pays off. A baby is about as young and healthy as it gets. You can get a terrific term or permanent policy for very little money. But that’s not all!
5. A Gift of Life Insurance for Your Children
Some people like to make a gift of insurance for their children, paid up when they’re adults. Probably a much better investment than buying a car. For this, a Guaranteed 20 pay whole life policy is a good idea. Basically, you make payments for 20 years and then the insurance is paid up. For example, if you take the policy out when your child is 2 years old, it will be paid up by age 22. Now, this doesn’t mean it’s a good idea to hand over the policy when your kid’s 22. In fact, I’d strongly advise against it unless you want to see your son or daughter cash out the policy to buy a car or go traveling. Nevertheless, over time there may be some decent growth in the cash value of the policy so by the time they’re let’s say, 35 years old, there could be a nice nest egg built up to help out with any number of things.
Universal life is another option – it’s a permanent policy but it’s more approachable because it typically does not have a cash value accumulation feature.
I am drafting an article about this as we speak if you are looking for more information about this – stay tuned!
Make Sure You Have a Guaranteed Insurability Rider
If you’re considering purchasing a policy for your child, I highly recommend making sure it has a guaranteed insurability rider and a conversion option (if you opt for a child rider on your policy).
The reason being, your child is now still eligible to buy further life insurance for an affordable amount of money…
…without providing evidence of insurability. So if you’re like our family and something comes up later in your child’s life they can still purchase comprehensive coverage inexpensively.
This feature is truly worth its weight in gold. It may not seem important now – but down the road, it can offer invaluable options.
Life Insurance for Children: Permanent vs. Term
You can choose between permanent and term life insurance for children. For most people, permanent insurance is the obvious choice. There’s a guaranteed payout – which means it gives your kid a nest egg at the end of the policy. This is terrific for those of you that would like to provide access to funds for college, a new home or just because.
Permanent policies also have a cash value accumulation feature that can be borrowed against. This is useful if you want some access to funds before the end of the policy term.
The thing is, permanent insurance is a lot more costly – especially when you’re an adult. However, for a child, a whole life policy can be VERY affordable.
A Child Rider
Term is always an option when buying a life insurance policy for your child. Larger coverage amounts are available. BUT your child will likely outlive this protection. This is the goal for anyone buying life insurance! The best part about this approach is you can convert it to a permanent policy at any point in time. This means you don’t have to provide the company with proof of insurability when you exchange the term for permanent coverage. This is terrific news for those that have newly acquired medical issues.
At the very least, you can add a small rider to your adult policy. It’s called a children’s protection rider and provides a small amount of protection (max to $30,000), covers all current & future children and is very inexpensive (approximately $9 more per month extra). It offers some future guaranteed insurability by allowing your children to convert a multiple of their own coverage to an eligible insurance plan when they become adults.
Life Insurance for Children: Financial Planning is Imperative
There are few things you can do for your family that are more important than financial planning. If you knew how many people I met that don’t even have a will you’d be shocked.
What will happen to their children if they pass away? Where do the funds go? Ugh, and chances are they have no idea how much it will cost their estate for someone to figure all of this out in probate. A little planning can go a long way when it comes to taking care of those you love.
Life insurance for children is just another aspect of this planning. No one can predict what the future holds but you can get ahead of things by planning. I wish I had known about life insurance for children BEFORE my son was diagnosed with ADHD. Then we could have purchased him a childhood policy and he would have access to affordable coverage for the rest of his life – and maybe a nest egg for college or university at the end of the term.
This is Why You Should Call Policy Architects Today
No matter what stage you’re at in your life insurance planning, Policy Architects can help.
We meet with people every day from all walks of life. From those who are elderly looking for small final expense policies to those who are looking for life insurance for newborns, we’ve got you covered.
Life has a way of getting out of control when we least expect it. BUT with a little forethought, many of the curveballs can at least be diverted.
I’m never going to tell anyone that a life insurance payout makes things all better – but it sure does help take the heat off when things are going to hell in a handbasket.
Give us a call today and we will find you the best possible coverage at the most affordable rates.