In The Details

Financial Articles from Hefren-Tillotson

Life Insurance for Children: Protecting Their Future

Written by
October 23, 2015

Many people believe the mere notion of insuring a child is morbid. They consider the policy to be death insurance and cant imagine profiting from the loss of the child. So, why should anyone consider insuring a child? There are many benefits of having a policy in place while still living and we will explore a few of these here:

The policy protects the childs future insurability
This is by far the most important reason to consider life insurance coverage on a child. The cost of insurance for a child is very minimal and you can design the policies to be completely paid up in as little as 10 years. Even if the childs health changes later in life, the policy terms can never be altered and the coverage is locked in for the life of that contract. If the health change was severe enough and the child becomes uninsurable for any additional coverage, this policy would provide that future protection that would not otherwise be available. Some insurance carriers even have riders that can be added to these policies which would allow the purchase of additional coverage later in life, upward of $1 Million in total coverage, without the child providing proof of insurability.

Policy cash value gives flexibility later in life
Many of these policies will accumulate cash value and pay dividends. If health is not an issue later in life, the cash value can be transferred to another policy or cashed out to cover other financial obligations.

The policy can be gifted to the child
Most often, the cash value is not used and the policy is gifted to the child, where they now become the owner and insured on the policy. If circumstance arise that would make them uninsurable as an adult, they now have the ability to change the beneficiary to protect their spouse and/or children as they grow their family.

The death benefit could provide additional time for proper grieving
The loss of a child would be devastating, and in the event of a premature death, the policies death benefit could allow the family time away from work and other such obligations. This policy would provide a source of additional liquidity which would permit adequate time to properly grieve.

These are just a few of the benefits of insuring a child from a young age. If you are parent or grandparent, I strongly encourage you to consider this as an option, because it could be the greatest gift you ever give your child or grandchild and their family.