Tips On Child Life Insurance
Life Insurance policies for children are sold purely on emotion and not on true need. The advertisements and sales agents will use lines like "if you love your child..." you will protect them with a life insurance policy. They will also explain how inexpensive life insurance is for children. There are a couple of problems with this.
While the commercials and sales agents may appeal to your emotions, the financial facts are that a loss of a child will actually relieve you of a financial commitment. That's not trying to make light of the emotional devastation that comes with a death of a child for which nothing can compensate. The fact, however, when looking at it purely from a financial perspective is that a family will not have to spend as much money when they no longer have a child to care for. It cost less not having a child than having one.
Another ploy is that children's life insurance is cheap. It is inexpensive compared to adult life insurance because, plain and simply, children rarely die. While the numbers that the sales agent puts together may make children's life insurance sound like a great deal, take the time to run what you'd have if you instead invested the exact same amount used on the insurance fees into a Roth IRA and you'll find the true cost of purchasing this type of life insurance.
When purchasing life insurance, it's important to remember that its main purpose is to replace an income that is lost when one dies. A child rarely has an income. Unless your child is a child TV star or the the main source of income for your family in some other way, there is rarely a need to have life insurance for him or her.
Comments
I have seen and heard much over the years- I would agree with almost all of you in some sense or another. I am a firm believer in children's life insurance, however, not all companies are created equal. What bother's me most is the "Suze Orman" approach that says kids NEVER need life insurance and ONLY Term is good. As an agent for a fraternal insurance company that is one of the largest insurers in North America, that boasts a AAA rating and the highest dividend rate of any company out there, I do not like being lumped in with C rated company because we both happen to sell permanent life insurance. There are many reputable insurers out there whose permanent policies for children and adults perform very well with guaranteed interest rates that will outperform many investments with NO risk and protect future insurability. My advice- do your homework, pick a AA or AAA rated company, find a good agent and insure you kids! You'll be glad you did. (make sure you have adequate insurance first)
This tip may cause real problem to some parents. If you buy life insurance for a child, one of the benefits that comes with it is the Eligibility Status. When your child is healthy and has no medical problems, and you purchased a life insurance in their name, when they reach the age of +20, and are willing to have their own policy, they have an option. If their medical status is fine, they just cancel the kid's policy and buy a cheap new one. If they have a medical problem, they can just continue with the basic one, and not be rejected by life insurers because of their medical status. In any given day I would suggest parents to acquire this option for their kids. quite cheap programs, that gives your child the options can be found in every provider of ADB policies (Additional Death Benefits)
Great exchange of ideas here. Yes, agree that not all Insurance agents are out there to just make a quick sale from you. Child insurance can actually cover you if something happens and at the same time is a good saving opportunity if everything turns out well:
Nick
www.superb-tips.com
I have 3 childred - I totally believe in life insurance for children. I strongly beieve that the people out there that don't believe in life insurance for children just don't understand the true benefits. I did not insurance my children because of a fear of death, but instead to guarantee insurability for the future and added a savings opportunity. My eldest daughter became diabetic at age 12 and is now uninsurable, she currently has $25,000 she can borrow against her policy for such things as school costs down the road. My advice, get educated and learn the benefits not all insurance agents are slimy salesmen!!
mandyconlon@rogers.com
If you have to insure your kids do it through your policy. Most life insurance policies have child riders that cost a fraction of the "child insurance plans". And if you don't have a policy, you have no business spending that money to insure your kids. The average cost of a $35,000 children's insurance plan would buy $150,000 in coverage for their parents.
bjack approoves
what is the best company to go to to purchase term life insurance for children....?? Most of them are whole life
i hear you but today my coworker made the announcement her 3 year old granddaughter died due to complications of the flu.
her son had no insurance on the child.
the only excuse for not insuring a child is if you have at least $10K in the bank on hand. the average $10K policy is about $5 a month. Most people blow that in a matter of minutes on useless items then are looking for handouts when emergencies arise.
Get a cheap term life policy for the child and take the difference of the astonishing cost of a whole life policy and invest it in savings for your child's' future college expenses. then they can get a good job and get a good insurance policy through their job with no evidence of insurability required up to a certain amount. dont' waste your money on policies that promise you cash returns. term policies are good enough. your child does not need life insurance until they are married, buy a house or have children - then they will need to replace income they are making to protect those who rely on them.
People talk about what a great deal insurance for kids is, due
to kids becoming uninsurable. Have you looked at the amount
of insurance you are buying? Really, not worth much. Gerber and
the others selling insurance for kids are vultures. Start SAVING for
young kids, not insuring them.....then they won't NEED overpriced,
high-fee so-called insurance.
Mike, look at you fees for your "whole life" policy. Your return on investment is abysmal. If you must insure your child, get a low cost term policy and by him cd's with a guaranteed rate of return.
The money you are diverting away from premiums will never amount to how much more term insurance coverage you could purchase. Again, whole life insurance in the lousiest means of investing on the face of this earth!! They fee you to death every single month on your investment, whereas every dime you put into a cd or even a simple savings account stays in your (or your child's) pocket.
Term insurance is cheap and renewable until age 75 and you don't have to lock in a "low rate" at age one to buy it cheap.
If insurance agents sold just insurance, all you insurance lovers would be correct. Unfortunately, most insurance salespeople are also selling high cost "investment" policies.
Same story, oh, your getting your child off to a great start by investing in their future. End result? Two years later at $37.00 a month, I have a $100,000.00 insurance policy with a face value of $100,186.00 and a surrender charge of $245.00. $888.00 in premiums and I have an investment worth -59.00. I would have been better off putting $37.00 a month into a savings account earning 4% interest. At least I'd have my original investment with guaranteed earnings and no fear of exhorbatant service, maintenance or whatever other crap fees Insurance compaines come up with.
Get a good insurance policy for yourself, start a nice savings account for your child and God forbid, something happens to him before he's an adult, you have money in savings for funeral expenses.
a parent cannot invest in a ROTH ira for a child. earned income is required, which a child does not have. i agree with TOM, this is a terrible representation on the issues and alternatives of life insurance for children.
for the record, i feel that whole life insurance is a 'no-brainer' for children and own policies for both my sons.
Wow, the worst article on life insurance ever, and the award for the worst advice goes too....
Thirty-six years ago our 16-month old daughter died unexpectedly. Her grandparents gave us the proceeds from a $3000 low-cost policy they had purchased. For a young couple on military pay, that was a godsend and helped us through a very difficult period.
We now have the same type of policies on our seven grandchildren. By the time they reach adulthood in 10 to 19 years, those $10,000 Whole life policies will have cost us an average of $662 each. We view that as a small price to pay for peace of mind. This was not a decision made out of emotion, but rather common sense.
jonny529
Jeff,as an agent if I gave your advice to a parent of a young child I would be sued if the child was to become uninsurable, and you can look up several law cases that insurance agents have lost due to negligence.
Right on. Alot of people call themself financial this and that. Anybody can be fooled by these axa,fca,cfd,fpp, or any other abc's following their name. Get to know the person from whom you would seek advice.
geocities.com/texasinsure/
We help people educate themselves first. Then they pursuade my associates of their needs. If you cannot sell us of your needs then there are reasons for us not to proceed. Ronald Angert.
.....people do become uninsurable.Even kids. I have 1st. hand experience.General statements don't always apply.I also know a lady who was recently divorced. She was very low on finances but when we found an old policy her father bought on her as a child her situation improved by 5 000 dollars.I also paid a death claim a few years ago. A young mother of two children died during an operation, leaving a husband and two little kids. The husband never thought it was important to have life insurance on a young bride. mother to be.At 18 just after his daughter got engaged the father of the bride bought and paid for a 150 000 dollar 15 year term policy. The premium is the cost of a Happy Meal.readronaldangert247.bl.../
read real life situations...real life issues.
Ronald Angert
I have a 20K SBLI policy on my son who is now 18. I purchased it when he was born for a one time payment of $125. It covers him until he is 21 at which time I intend to increase the policy. My father did the same when I was born and continues to pay for coverage for me, it is only for 20K also, enough to bury me and a collation afterwards. Of course I have additional coverage that I purchased on my own, that would provide for my wife and children if I were to prematurely pass away. The point of my reply is that I feel a small life insurance policy on a child is a good idea.
I have 25k of life insurance on my children, ages 1, 3 and 5. I did not buy life insurance because of any scam or sales pitch. Your right, its emotional, but your article telling people not to buy life insurance for their children will be emotionally devasting to a family that loses a child and has to borrow money for the funeral since they can't use their investment money without taking a hefty penalty in taxes or bad market prices! If you want to talk pure finances, why would you want to liquidate $15,000 from the college savings plan to pay for a funeral, when $200 of life insurance costs would provide the same $15,000?? Saving for college is just that, savings, but how in the world is that Roth IRA or savings plan going to provide a memorial, a scholarship fund, grief counseling, replacement income while I take a month off of work if I lost my child??? If I can afford $600/month on car or house insurance that I will rarely ever collect a claim on, why in the world wouldn't I purchase life insurance on my child should there ever be a tragedy. You are very naive, or an investment salesperson, to really believe this logic. Life Insurance is very much needed for my children, and for many reasons other than replacing their net worth. You can never financially replace a person, but Life Insurance is the only thing that can guarantee me that a funeral will be paid for, among other things. And since I have permanent insurance, this is a gift to my child that will protect him when he has his own family. My only caveat - buy your insurance with a highly rated company, the author of this article may feel this way because of doing business with a poorly rated company. Life Insurance is almost always a smart part of a total financial plan, it serves a special purpose that no college savings plan or Roth IRA can ever do, and for a few pennies on the dollar, Life Insurance does it better than any college savings plan or IRA ever will do.
Everybody forgets that children are insurable,"sick" adults with diabetes or other sicknesses are not.Buying the proper insurance is for the child's future family,not for the parents.Ask a diabetic who cannot get mortgage insurance,how do I save my son future problems?I buy him life insurance while he is insurable($100,000 with possibilty of adding $100,000 more.for$50/month for 10 years),and whoever tells people that insurance for kids is a scam,should stop insuring their property and cars,because break-ins,accidents,and insurability problems are just "fears" exploited by marketers!
I have 10K of life insurance on my daughter, but it's a term policy through work that costs less than $15 per year (55 cents per paycheck). I figure I'll use it for the funeral and for the psychiatric care that I will surely need if anything ever happens to her.
Great article. You hit the nail on the head. Life insurance is to protect the dependents from the money makers, not the other way around. As a financial planner, it's a difficult area to talk so openly about often, because it is emotional.
And yes, the prepayment to lock in is true of some of the policies, but it's not enough to overcome to make it overall a good deal. There's a couple of problems. Better to find a nice college savings plan to invest these premiums if you want to have something for a son or daughter.
You didn't mention the ploy the use that you can lock in "NOW". The biggest scam in my opinion, because they use it not only to sell you the policy, but to keep it going! The exceptions in the policy, the amount of premiums you spend, the low face value of the policy anyway, the time value of money, and the simple fact of inflation really kills that aspect from a financial perspective. Sadly, however, fear of being uninsurable is a big seller, and those marketing folks know that.
Isn't it true, though, that you can 'lock in' low premiums for life for your child by taking out a policy when s/he is young? That is, buying the policy isn't so much for the parents, but rather for the child -- the child's future beneficiaries.