Whole Life Insurance for Children
Using Whole life insurance for children in your planning is a costly plan that is designed with several benefits. Beyond the costs, for some individuals, Whole Life Insurance provides peace of mind in the event of an unlikely death, and it provides a form of savings.
This policy is not for everyone. With certainty, it is not the lowest cost way to purchase life insurance on a child. Regardless, I have highlighted some of the moving parts in Whole Life Policy designed for children that you should understand before spend the money.
Whole Life Insurance for Children builds Cash Value
Parents and Grandparent who purchase a whole life insurance policy often do so with the idea that the child is going to benefit from the savings. Most policies do not start building cash value right away. Some may take several years to see significant cash value.
Premium Payments can be Fixed
The rate you pay can be locked into never increase. This means that the price you pay today will continue to be the price you pay for the life of the policy. This is a nice feature for grandparent on a fixed income or anyone who does not want any surprises.
The Cash Value is yours if you Surrender the Policy
If you no longer need the insurance, you can surrender the policy and receive the cash value that has accumulated over the years. Nevertheless, don’t expect this policy to build up and significant amount of cash value. You will likely see big fat goose eggs for the first 5+ years.
Securing Life Insurance for Future Insurability Needs
The benefit in buying life insurance for children is that you are securing their future life insurance needs. Should they develop an illness like juvenile diabetes, or cancer, they could find it hard to purchase life Insurance or be denied insurance all together.
Money for Education
What is great about Cash Value in a Whole Life insurance policy, is the fact that it does not need to be factored in to the FAFSA calculations. This means that your child could qualify for more Federal Student Aid and still use the cash value. Outside of this benefit, if you are saving for education a 529 or a Coverdell Education Savings Account are better.
Guaranteed Lifetime Protection
As long as the premiums are paid, the child will be insured. I could not find a marketing example, but this guarantee suggest that if your child becomes a pot head (smokes marijuana), uses street drugs, has health issues, and commits a felony, they will continue to provide coverage.
No Exam Required
The process and application for a whole life insurance policy for children is easy and does not involve an exam. This is true for most juvenile children’s life insurance. They will not need to be poked with a needle or give a urine sample. Just a few questions, and done.
Whole life insurance for children does not always mean that the policy premiums must be paid for life. A policy can be paid in up in full in as little as 7 years if designed properly. There are also 10 pay and 20 pay options. The advantage in these payment options is passing over a policy and not a payment book to a young adult. If you have done your due diligence and still find that a Whole Life Policy is right for your child, give strong consideration to a 10 pay or 20 payment option.
Safe Predictable and Positive Growth
Insurance companies can provide you with the safety of guaranteed benefits. When you purchase a policy based on the guarantees and can accept those guarantees as being the worst case scenario, you might be content with your decision.
Return of your Money
Are you purchasing Whole Life Insurance for Children as a “safe money investment?” The first questions you should ask is, “How long will it take for me to break even?” With insurance, the answer is most likely at death. For pure death protection, you may be best to consider a lower cost option and save your money elsewhere.
At the end of the day
Whole life insurance for children can be more expensive than term and a term child rider. It doesn’t make sense for families that don’t have the extra money. Yet for those who do, whole life insurance options might make you feel better and be viewed as a rational purchase in this low interest rate environment. Still, you will not likely see the day that the return of your money will break even.
Whole Life Insurance for Children as an investment
Despite what marketers might tell you, this type of insurance policy is not a good investment.
What it does well is provide the owner with peace of mind and a fixed cost with no surprises. Purchase a whole life policy If you have the extra money and can successfully manage a 10 pay purchase option.
While you will spend less money purchasing a term policy or term rider, you might be out of luck if you or your child miss the window to convert the policy. Nonetheless, there are benefits to whole life insurance for children that should be considered.
Whole Life Insurance for Children Conflicts of Interest
Buyer beware of the conflicts of interests when purchasing any policy. whole life insurance Moreover, many insurance agents can design a permanent insurance policy with their commissions in mind. This can make the policy less likely to do anything else other than what is guaranteed. For some policies, your insurance agent can minimizes commissions. While this is not an option with every policy, when commissions are reduced your policy perform better.
You may also want to review best life insurance options for children if your grandchildren are young. As a grandparent, you are best to have a solid life insurance plan in place for your family, children and your grandchildren.
Wonder What life Insurance Solution is Best for your child or grandchild?
Feel welcome to reach out and ask us about solutions for Life Insurance for children. We do our best to respond to questions via email within 24 hours. While I can’t guarantee we’ll be able to help everyone, we do our best to at least get you the answers you need. We do this so you don’t make a long-term commitment to a complicated financial product you might later regret. Simply reach out to us or leave us a comment at http://lifeinsurancetoolkit.com/contact/
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Jose, Hoser, Joe from the Show