Although opinions are mixed as to whether to buy life insurance for children, one advantage may be the low fixed life insurance rate. Even though most parents do not like to think about these things, there are some practical reasons to consider buying life insurance for children. Life insurance for children is a controversial issue, however, depending on your life situation, it might be something worth thinking about and looking into further.
Death Benefits
If tragedy strikes and a child dies, parents may find it difficult to pay for burial expenses. A funeral service and burial can cost several thousands of dollars just for the basic fees. An unexpected death can place a financial burden on a family if there is no life insurance to pay for the burial costs. Children's life insurance policies are inexpensive, and there are different options from which you can choose if you only want to insure possible funeral expenses. You can purchase low cost term life insurance with a death benefit of $10,000 often for less than $10 a month. Another alternative is to talk to your insurance agent to find out if you can add your child to your own life insurance policy, in which case the coverage will cost you a small, additional premium.
Payment of Medical Expenses
If a child suffers from a long illness or debilitating injury before death, the family could have unpaid medical bills and other expenses. Sometimes families must take out a second mortgage on their home to cover these costs. However, when there is a life insurance policy in place, families can use the insurance benefits to help pay off any remaining medical bills or other loans that were used to pay for the child's medical care.
Permanent Life Insurance
If parents purchase a permanent life insurance policy for a child, the insurance policy can be carried over into adulthood. Once a child becomes of age, he can take over the policy on his own. Since there is already a life insurance policy in place, the child will not be subject to pre-existing exclusions for health problems or disabilities when he is an adult. This can be a significant advantage if by adulthood a child has some medical problems and needs life insurance.
The American Institute of Certified Public Accountants points out that your family's medical history can impact whether your child will be able to get life insurance as an adult. Premiums cost less for a child than for an adult. Buying life insurance for your child may be a smart move if chronic illnesses like diabetes or heart disease run in your family. Even if your child does not develop these diseases, waiting to get life insurance later on as an adult could significantly increase the cost of the premiums. However, if your child is predisposed to certain chronic health conditions, you will want to purchase an adequate amount of life insurance.
Help Pay for College
If parents take out a life insurance policy for a child in part to access the cash value, there will be funds available when the child is ready to go to college or buy a home of her own. Some policies allow a certain amount of money to be accessed without being subject to taxes. While the cash value of this type of insurance policy builds interest, there are a number of other alternatives available for saving for a child's future. According to Bard Malovany, a certified financial planner in Annandale, Virginia, education IRAs and state sponsored education plans are investments, which yield higher returns.
Arguments
Although both sides of the issue of buying life insurance for children offer a number of pros and cons, statistics compiled by the American Council of Life Insurers report that only about 15 percent of children and teens under the age of 18 have life insurance. One argument is that, although a child's death can have heartbreaking and emotionally devastating consequences, in most cases, it does not reduce a family's income. Loss of wages is usually a primary motive for purchasing life insurance. Another argument is the possibility that the child may be uninsurable as an adult. However, most healthy 20-year-olds can still qualify to buy life insurance at an affordable cost.
Parents' Insurance
Whether or not you can afford to buy life insurance for your child may be irrelevant unless you purchase enough life insurance for yourself. If you are a wage earner, your family likely needs the protection in the event of your sudden or premature death. Nowadays, most people can get life insurance. The only catch is if your family has a history of poor health or inherited diseases, your premiums are going to cost you more.
Member Comments