Getting life insurance for your child is a pretty rare occurrence. And in most cases, life insurance companies recommend buying life insurance for children only when needed. Usually, life insurance helps the dependents cover the bills when the breadwinner of the family passes away. Because nobody is financially dependent on your child, they do not need any coverage, unless there are certain circumstances.
It surely is a true fact that life insurance coverage can go up as and when you age. It is unlikely that your child will be denied of any policy when he/she adults. Life insurance for children is five times more expensive as compared to term life insurance. They are costly to maintain for the entire lifetime of your child.
But, child insurance does make sense in rare situations – for example, if your child is suffering from an illness that will make it harder for him to get a policy when they grow up.
Who will need child life insurance?
In rare cases, child life insurance can benefit you. This is if –
-
Your child is suffering from a health condition that is bound to get worse as they grow
-
Your child is likely to develop an illness growing up based on the family medical history
-
You or your loved ones are financially dependent on your child.
Adding a child rider to your term life insurance policy is simpler if you want to ensure your child’s life. Child rider provides death benefits if your child dies without the complex investing component. If your child needs a lifelong coverage, it can be converted to a permanent policy. A child rider is comparatively affordable as compared to a full child life insurance policy.
How does the child's life insurance work?
Life insurance for the child works just like life insurance for adults. The policyholder is bound to pay premiums and the policy is paid out to the beneficiaries – parent or a guardian in this case. It is paid when the insured passes away while the policy is still active. Since life insurance is for kids, this insurance coverage will last for their entire life.
Most child policies are marketed as financial tools which serve as an investment for the educational expenses of the child, they offer affordable premiums for the child, insurability of the child is protected and it also promises to cover the funeral expenses if the child dies.
However, unless your child is suffering from a serious medical condition, these policies –
-
Do not offer competitive rates as compared to the term life insurance
-
Does not necessarily guarantee the insurability for the child
-
Come with low rates of return and expensive administrative fees
-
Does not accumulate sufficient cash value when you need the money
Should you pass away, you can provide better protection for your child. This can be done by having an insurance policy that pays out to the guardian if the minor is unable to accept the insurance payout in order to support their needs.
Is life insurance needed to protect the child’s insurability?
A lot of parents purchase life insurance for their child thinking that it can be a good way to guard their children in case of worst scenarios. The reason behind that is that if the premiums are locked now, the child will not have the need to buy an expensive policy when they are adults. They can be protected if at all they develop a medical condition.
But, in reality, you do not have to protect your child’s insurability unless a medical history of serious medical conditions prevails in your family that the child can develop in the early life. And talking about locking in premiums, adults in their 20s and 30s have no issue in securing affordable life insurance quotes.
Before you buy
Before you opt for child life insurance, you must assess your budget and review the existing investments. Before buying life insurance for your children, you must also look at your own coverage needs. You must add a child term life rider to your own policy instead of investing in a separate coverage for your child. In some cases, this child rider can be converted to permanent coverage when the term is completed. All the insurers may not offer these riders and also they may offer limited coverage amounts.
In conclusion
Although sometimes, life insurance for the child does not always make sense. But, it can be a good solution for certain families. High-income parents can transfer the wealth to their children through a life insurance policy appealing or tax-advanced growth on the cash value portion of the policy.
Also, if your family has a medical history of conditions like diabetes, you must get your child insured. This way, you need not worry about whether the child will be denied the coverage later on in life if they develop a medical condition.
Have a word with life insurance companies. They will help you decide whether life insurance is a good fit for you and your family or not considering your current financial situation.
