Life insurance policies are set up to protect those who are financially dependent on the policyholder. Since children are not relied upon financially, it is not imperative to consider a life insurance policy for them.
Some might consider getting a children’s life insurance policy because insurance rates go up as you age. But it’s very unlikely that an adult in their 20s or 30s would have any trouble qualifying for an insurance plan. It is not necessary for a child to have an insurance policy. Others may see that the cash value component grows over the years and wish to buy children’s life insurance as a savings account. But a regular standalone investment account offers better rates and faster potential growth.
In the event that you desire an insurance policy for a child, it will almost certainly be a whole life policy which will be costly and intended to last throughout their lifetime. This would be encouraged in rare cases or if you have a family history of serious medical conditions which develop in childhood years. Like any other whole life policy, premiums must be paid and a benefit will be issued to the parent or guardian named as the beneficiary if the child dies.
A more popular option is to add a child rider to your life insurance policy. For as little as $50 more per year you could have coverage for up to $10,000 per child. This could be used to cover funeral expenses in a worst case scenario or be converted into a permanent life insurance policy later when the child is grown. The same amount of coverage if the child had their own insurance policy could cost up to $50 per month.
Other options to consider would be a 529 plan, designed specifically for higher education expenses, or a custodial account which is operated by the parent or guardian and released when the child is grown. If your child earns income, you can also open an IRA account for them and match savings to build a nest egg for retirement.
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We all want to make sure our children are taken care of if anything happens to us. Your best protection is your own policy, potentially with a child rider. If you feel strongly that a life insurance policy is in the best interest of your family, reach out to us today and we can help with the process.