Future Insurability Option for Kids
Purchasing Life Insurance as a Future Insurability Option for Kids is sold by insurance salesman as another golden nugget (to make you feel good about buying something you likely will not use). They tout that it locks in a child’s ability to qualify for more life insurance later. There are two solid reasons that you should purchase life insurance as a future insurability option for kids.
In this post, we will review why the future insurability option for kids is secondary, and review two solid reasons. The two reasons are health and lifestyle related.
- For a child who develops a medical problem early in life and might not qualify for adequate coverage later on in life when there is a strong need.
- For a child who has a strong possibility of having a lifestyle that could disqualify his ability to purchase life insurance.
We will dig in more on these two exceptions and examine their place in securing life insurance for future insurability option for kids later in this post.
“There is no need to buy a life insurance policy for children…”
Why Dave Ramsey is Wrong!
Some talking heads like Dave Ramsey claim that there is never a need to buy life insurance on a child. I recently read a post by Ramsey where he claims, “There is no need to buy a life insurance policy for your children, even one like Gerber life insurance, which is a whole life policy that claims to help you save for college.” We can appreciate his stance for financial education, but this blanket statement is not always true.
Reviewing the Need
The primary need for most families is not for future insurability. Rather, purchasing life insurance for a child is planning for unlikely death. The main benefit of the insurance would likely be for paying related burial expenses. Should you purchase insurance for this reason, consider a low cost burial life insurance for children.
As a quick recap in purchasing burial life insurance for children, you should plan to pay for four costs:
- burial expenses,
- medical expenses
- emergency transportation costs
- bereavement time away from producing income.
If you have saving well, and are self-insured in the event that you can cover these expenses, you may not need burial life insurance.
Moreover, if you found this post because you are interested in life insurance as a future insurability option for kids, you will not find dave Ramsey quote as sage advice. If you have a known genetic family medical history and you are concerned about future insurability option for kids, this post is for you.
Don’t let that Damn Insurance Salesman, that we talked about in the post “Life Insurance Child Rider“, make you feel all buttered up with his pitch. I am sure he would say something like “you must secure insurance for your child for future insurability reasons”. For most people, there will be a better reasons for life insurance or investigating smarter savings options. While considering a policy that has future insurability options for kids, understand that this is an added benefit to the primary insurance need.
If you are not self insured and have headed my caution about damned insurance pitches. Read on to hear more about the two Reason.
Lets Dig in!
Reason #1: Health
One of the benefits of examined in the post, best life insurance options for children, was the ability to secure future insurance in the event that the child develops a major medical illness. The plan is for the parent to purchase insurance on their child while the minor is healthy. By securing insurance before the child develops health issues, the parents are securing coverage and preventing the minor from being denied coverage later as an adult.
Looking ahead can be a beneficial. Especially if your family has a history of major medical illnesses or issues are likely caused by genetics. Some illnesses are not automatic declines, but many will come with a cost that may make it extremely expensive.
Lets look at a few example.
I have found that most major insurance companies will automatically decline Juvenile Onset Diabetes. Juvenile Onset Diabetes occurs when the child is diagnosed with diabetes younger than age 20. This type of diabetes is also known as Diabetes Mellitus, type 1 diabetes, and insulin dependent diabetes.
It is unknown if the type 1 diabetes is genetic. Yet, if your family has a history of Diabetes, your consideration for a life insurance purchase for future insurability option for kids is warranted.
Another medical illnesses that are automatic declines with most major companies are MS. According to the National MS Society:
“While MS is not hereditary, having a first-degree relative such as a parent or sibling with MS does significantly increase an individual’s risk of developing the disease. Studies have shown that there is a higher prevalence of certain genes in populations with higher rates of MS.”
These are just a few examples. Feel free to leave a comment below or contact us if you have a specific medical example you would like for us to review.
Reason #2 LifeStyle
Mark Twain is credited for saying: “History doesn’t repeat itself, but it does rhyme.”
You likely will not accurately predict your child’s future occupation or lifestyle. Yet, if you have strong family traditions that could potentially place your child’s future insurability at risk, you may want to consider planning using a life insurance policy that is designed for future insurability option for kids.
Mr. Fedorable, that’s me, spent 5 years in the Air Force. Many of my brothers and sisters at arms were exposed to shit many of us don’t want to talk about or mention in detail. As a member of the volunteer military, we were given shots for different vaccines and exposed to chemicals that are known to cause different long term issues.
All things considered, I would choose this lifestyle and service to my country again. Afterall, military service in my family is a strong tradition.
If your child is likely to join the military, their service may limit their ability to secure enough life insurance or they may be declined all together.
Moreover, when a soldier returns from service they may have a major injury or disability. Service related or connected disabilities may make it difficult to purchase life insurance. PTSD, Gulf War syndrome, agent orange are just a few examples. Securing life insurance prior to military service, may be a smart purchase.
Mrs. Fedorable, is an adrenalin junky. My wife has over 200 Skydiving jumps. While we were able to secure coverage, it was not without challenges. Most options were extremely expensive. Had she had a policy in force prior to her adrenalin feeding hobby, she would have benefited.
If your child is likely to be a skydiver, rock climber, scuba diver, or the like, you may want to consider an insurance plan with a future insurability option for kids. Obtaining life insurance as an adult could be difficult, expensive or coverage may be excluded if death occurs during the excluded extreme sport.
Not an option
Some employers offer a small group life insurance coverage for you and your dependents. It is very unlikely that these policies offer portability. Without portability, should you leave the company, you can not continue with the company’s insurance.
For this reason, group life insurance stinks as you can not keep your coverage, or coverage for you child if you are no longer working for the company. Unfortunately, coverage terminates the moment you leave your company.
If you find yourself or child with a uninsurable health issue, securing coverage through your employer might be your best and only option. You might want to think twice befor you look into a new employer.
Yet, if your child is insurable, you are best to consider your options outside of your employer’s group life insurance as a solution for future insurability option for kids.
You may also want to review best life insurance options for children if your children are young and under your support. As a parent, you are best to have a solid life insurance plan in place for your family and your children. A common low cost solutions is a child rider but there are other often less expensive options.
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Jose, Hoser, Joe from the Show