Why Would Someone Purchase Life Insurance for His Child?
Buying life insurance for your child has been a long-standing topic of substantial debate. Arguments on both sides of the issue have repeatedly been presented, each with its own merits. Understanding the benefits of purchasing life insurance on your child will help you evaluate the issue and make a more educated and informed decision about whether or not coverage is appropriate for your goals and individual situation.
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Policy Types
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The vast majority of life insurance types issued to minor children are permanent policies. Whole life and universal life are the most common forms of permanent protection purchased for children. Many insurance carriers will actually refuse to issue other types of policies to children and have specific restrictions on the types of products available and the face amounts for which minors are eligible.
Final Expenses
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Providing for burial expenses is the most obvious reason someone would purchase life insurance for her child. Funeral costs are continually increasing, and often exceed $10,000. Without life insurance on your child, you would have to find other means of acquiring the necessary funds to pay for your child's final expenses.
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Future Insurability
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Medical exams are not required as part of the application or underwriting process to purchase life insurance for a child. Carriers will typically automatically place minors into the "Standard" underwriting category, assuming that they are in average good health and do not present extraordinary risks. If your child develops a disorder or condition that would ordinarily result in the declination of a life insurance application, their "standard" underwriting status is protected within the policy you purchased, often allowing for an increase in coverage without additional medical analysis or investigation.
Investment Accumulation
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Permanent life insurance products are designed to accumulate cash value. Buying a policy for your child will allow for substantially greater interest earnings over the years. As an adult, your child will have the option of terminating the policy and withdrawing the accumulated value, reducing or possibly eliminating future premium payments entirely, or continuing normal scheduled premium payments to further increase the investment potential of the policy.
Level Premiums
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Premium payments for permanent life insurance policies are designed to remain level for your entire life. The cost for coverage on your child will be minimal, and will remain level forever. As an adult, your child's financial outlay for the policy you bought will be extremely small. The cost for identical coverage as an adult would be significantly higher than the premium required to maintain a policy purchased as a minor.
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- Photo Credit Child image by Serenitie from Fotolia.com
