Regardless of how old you are, you may have thought once or twice about purchasing life insurance policies on your children. This may be because we never know what happens in life, and unfortunate circumstances may occur – as it would to any one of us.
Many insurance agents are against purchasing life insurance on a child. There are also just as many agents who think doing so is a financially smart move. Whatever your feelings about this issue is, here are several things you should know about your children’s future and life insurance.
1. Buy A Rider
Term life insurance policies, which cover yourself (or your spouse) can also cover your child’s life as well. This extra policy feature is called a rider, and applies up to $20,000. These typically provide coverage for up to 30 years, and pay death benefits to the beneficiaries. Unfortunately, as there aren’t standalone policies applicable for minors, this is the only way to buy term life insurance on any child.
Earlier we mentioned the benefit of purchasing “riders”; another benefit you need to be made aware of is the fact that they themselves, when they’re older, can expand their coverage. This occurs at a guaranteed rate, regardless of their quality of health. Discuss policies with your insurance professional about receiving coverage they need despite changes to their health.
3. Is It Right For You?
Before buying insurance on your children, understand that adults typically pass before their children do. From a financial standpoint, some people make the arguable point that it is more fiscally responsible to put funds for them into an emergency fund. However, life insurance payouts (in the event the child passes) are in sums that can pay costs that emergency funds cannot. Companies like IntelliQuote have professionals that will make it easy for you to find affordable life insurance rates, and decide whether you want to choose a policy or put stake in an emergency fund.
4. Saving For The Future
At the age 21, your “baby” can choose to either extend the insurance coverage, thus having enough coverage for the rest of their lifetime… or turn in the policy, receiving the available cash value of the initial policy. Whole life insurance is a policy that builds cash value over his/her lifetime – or money that’s set aside. The longer the policy is owned, the more cash value grows within the policy. This is why it is important that your young one understands the value of saving.
5. Seek Counsel
Before choosing any policy, no matter from which life insurance firm seems the most attractive, always be sure to talk to an insurance professional and adviser. These insider experts know more about than the prices of life insurance firms available. This includes prices that may not be readily apparent to casual browsers.
6. Paying Premiums
When you apply for insurance policies, the premiums you pay each month are based on the age and level of health of your child at the time of application. The younger your child is means rates will be more affordable, even when the child is an adult. This is because of the same monthly payment of the policy.
Income protection and funeral cost coverage are great reasons for both adults and children to apply for life insurance. We tend to think this applies to adults, forgoing children entirely. However, these policies prepare them with a number of financial advantages later on down the road as they turn into stable adults.