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The Importance of Life Insurance For Children


The importance of having life insurance for children is a subject of debate among financial experts. Some people argue that since children do not have dependents or significant financial responsibilities, life insurance for children is unnecessary. We definitely understand the thought process behind this, and it's one of the more common thought processes for life insurance. However, when it comes to life insurance, looking at it when your children are younger is the absolute best time to be considering it, and it's for a few things.


Future Insurability

The idea that your child is healthy now is reason that they don't need any coverage, and that is what can cause so many issues for them later down the road. When they are young, that is the most ideal time to look into insurance because their health is likely at a very good spot to make sure they are easily insurable.

By getting something in place early their coverage is in effect meaning if one year down the road, they do have a health issue pop up, as long as that policy is already in force, coverage won't be denied. If you decide to wait until later on in their life when a health issue does arise, the likelihood of them being denied coverage increased. If they are to be approved for coverage though, they will likely be rated with a higher monthly premium.


Cash Value Accumulation

Cash value accumulation is one of the biggest benefits of getting life insurance for children at a young age. Think of it in the way of investing. The earlier that you start investing, the more time that money has to grow and become a bigger stockpile. The same general concept can be had for life insurance with children.

Typically for children, whole life is the only option you have for a juvenile policy. By getting the whole life you are locking in the lower rate for their entire life, but it also provides the ability to have the cash value grow much more. Many companies even have an investment policy such as an Indexed Universal Life policy that does act as an investment vehicle and a life policy combined. This can provide a source of savings or investment for the child's future, which can be used to pay for college, a down payment on a home, or other expenses.


Final Expenses

The thing people think about most with life insurance is that it is meant to take care of final expenses, and that of course is true as well. One issue is that final expenses include a lot more than just a funeral cost. Again getting the whole life earlier will get them locked in for life at that low rate, but it would also provide a significant amount of money to their future family to pay off expenses such as

  • Funeral cost

  • Mortgage

  • Personal debt (credit card debt, college loan debt, etc.)

  • College for their children

Having life insurance on kids may seem unnecessary, but the benefits it can provide to their future families at a lower rate are hard to find. A thing to remember is that each year they get older, the higher the cost of insurance would be for them. Just within our agency alone, a one year old can get a whole life policy that provide their future family with $150,000 for just $33/month. Now, if you did not do that and they decided to wait until they were 35 and had been in a steady job for a bit and started having a family of their own, that same policy could cost them as much as $140/month assuming they are healthy enough to be accepted.

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