Life insurance is generally a good idea. You can’t put a price tag on a person’s life, but you can ease the stress of that person’s passing by providing a financial cushion for his or her loved ones. However, this is a completely different story when obtaining life insurance for a child. Before considering life insurance for your child, there are questions you need to ask yourself before moving forward.
What Is The Purpose Of Life Insurance?
On the surface, life insurance is about providing a windfall upon a person’s death – but this isn’t for arbitrary reasons. It’s aimed at replacing a person’s income upon his or her death. He or she may have loved ones to provide for. It could also mean paying remaining debts and estate costs so loved ones won’t have to.
This leads to the first point of why life insurance is unnecessary for children – children don’t have dependents. They are the dependents. There’s no income to replace, because they can’t legally gain employment. No child will ever be able to obtain a mortgage, nor will there be any estate costs after they pass away. That’s also why life insurance payouts for children pale in comparison to traditional policies.
Can It Help With Emergencies?
Some whole life policies feature special savings accounts for a portion of the premium payments to be deposited into. However, it takes years for these accounts to build to become useful in any capacity. There’s also a withdrawal fee. The amount you contribute in premiums makes the payout a diminishing return.
The same holds true for education. Insurers will use this as a selling point, but by the time your child is ready for college, the funds won’t be any more substantial than if you stashed the money away yourself.
Is It Possible For My Child To Convert It Into A Traditional Life Insurance Policy?
The death benefit for this type of policy can’t and won’t be anything like a traditional life insurance policy. There’s a limit to how much you can add to a child’s life insurance policy. There is no conversion rider to attach that can turn a child’s life insurance policy into a standard life insurance policy. In fact, your child is better off purchasing a life insurance policy on his or her own after reaching adulthood.
What Are Better Options?
For a significantly lower fee of no more than $60 per year, you can attach a child rider to your life insurance policy. However, it’s better to put money in a savings account if you can. You can open a separate savings account at your bank, minus the monthly premiums or hefty withdrawal fees.
Get The Right Policy Today
Better Insurance Management brings you the policies you need and deserve. We do not operate out of self-interest or maximum profits. We work for your best interests, and that includes helping you get the perfect policy at the lowest cost. Call us today at (732) 458-5000.
