It’s difficult to think about the death of a child, especially soon after birth. However, you will probably see advertisements for life insurance policies for your children and the question is whether or not you should really make the purchase. Despite the grim topic, there are some benefits to making a purchase early on.
Assessing the Death Benefit
Most adults purchase life insurance to protect their families from financial loss should they die. The primary goal is to replace the income that would be lost. While a child has no income, there are expenses associated with a sudden death that can be crippling to a young family. If your child passes away due to an ongoing illness, you may also find you have a pile of outstanding medical bills. The death benefit will help with those costs as well as funeral costs.
Cash Value Growth
Buying a whole life insurance policy for your child is a great way to save money for college or future life expenses. If you start early, the premiums you pay into the policy will build cash value. You may be able to withdraw funds later in your child’s life in the form of a policy loan. This may help with future college expenses or car purchase if, for some reason, you have trouble with other funding sources.
Your Child is Insurable
A healthy baby is an insurable baby, and the “insurability” status at the time the policy is written is what matters. Insurance companies are most willing to sell policies to healthy individuals. They know that they can’t control whether or not you become ill later on. An insurance company is reluctant to insure an unhealthy individual. If you wait until your child is ill, the insurance company is guaranteed to end up having to pay out on your policy and will either deny your request for coverage altogether, or charge you a huge premium amount.
The earlier you buy the policy, the more likely it is your child will be able to carry that policy – especially a whole life policy – into adulthood. This doesn’t mean your child will not be able to get a policy if he/she, for example, develops diabetes as a teen or adult. It just means it will be much easier and less expensive to insure him/her.
There are many different insurance options out there, some with better interest rates than you can get from a cash value on a whole life insurance policy. It’s up to you to discuss the pros and cons with your insurance professional. If nothing else, you could always consider a Term life insurance policy with a lower death benefit for immediate protection and then reassess your needs as your child grows.