Should I Buy Life Insurance On My Young Child or Grandchild?

There are 3 main reasons to buy Child Life Insurance on your young child or grandchild.

1.  Life Benefits help with final costs should the unexpected occur.

    • For most people, life insurance is purchased to cover final expenses, to replace lost income, and to leave some financial help for dependents. Since a child will not have an income or dependents, the life benefit’s main practical use is thus for final expenses. Should the unexpected tragedy occur, the policy benefit can be used to help pay the high costs for the funeral service, burial, and incurred final medical expenses.

2.  Give your Child or Grandchild a head start in their financial planning.

    • When they turn age 18, they can have a policy that has a much higher benefit than the original benefit you purchased.
    • Policies accrue value at a guaranteed rate! While this rate is slower than the average market return, the stock market is far from a guarantee.
    • The Cash value built is also tax advantaged, unlike the stock market.

3.  Protect your Child or Grandchild’s insurability.

    • Should your child or grandchild develop a disability or chronic illness late in life, it will be hard, too expensive, or impossible to purchase life insurance when it’s needed the most.  (Keep in mind some diseases run dormant and unpredictable in a person until adulthood.) Having a policy already in place would be a huge asset.

 

Even trusted financial bloggers state that this insurance is worth the buy, here is a long article with many reasons to buy Child Life Insurance:

http://www.nerdwallet.com/blog/finance/advisorvoices/buy-life-insurance-children/

What to buy?

There are many options to consider such as riders to existing policies, child specific policies, Single Pay Whole Life Policies, and Ten Pay Whole life policies.

An example of a specific product for Child Life Insurance is Auto Owner’s Simplified Issue Children’s Advantage Plan Plus.  This product’s benefit increases automatically by 50% at both ages 18 and then again at 25 for no additional premium. The estimated cost for this product for a $10,000 benefit is less than $100 per year with no medical underwriting. That is quite a deal!*

*For more on this product from Auto Owners, click here: http://www.auto-owners.com/our-products/life-insurance/life-insurance#SIKID

Cost

A cost example prepared recently is for a 10 Pay Whole Life policy on a child less than a year old with a $10,000 benefit, the premium would cost $101 per year for 10 years.  After 10 years, the product is paid up in full, and during that time, the policy has been accruing cash value at a guaranteed rate from age 0!*

*Cost examples are always subject to change.

As with all life insurance, the purchasing decision becomes very personal and financially dependent.  With the average American funeral costing between $7,000 and $10,000, it might not hurt to at least get a quote. (http://funeral-tips.com/funeral-costs-how-much-does-an-average-funeral-cost/)

Consult a knowledgeable agent as well as a financial planner before making any decisions.  Give us a call, and we can help!

About Joe Popkowski