Many people have probably never considered that they can purchase life insurance for their children or grandchildren. A likely reason for this is that many people are not aware of a purpose for life insurance beyond replacing a person’s income or leaving an estate when they pass away. Life insurance is actually something that every expectant and new parent should consider purchasing for their child.
Child life insurance policies are “whole life” policies that are designed for healthy children between 14 days and 14 years of age. Parents, grandparents, and permanent legal guardians can provide their little loved ones with insurance benefits that they can use later in life. Such benefits include:
Whole life insurance protection. “Whole life” insurance policies build cash value over time, and the premiums never increase. Term policies differ from whole life policies because term policies don’t build cash value and the premium is subject to change over time.
Some policies double the coverage at 18 years of age. This means that a $10,000 policy increases to $20,000 at age 18 with no increase in policy premium.
Child “whole life” policies build cash value. Giving your child or grandchild the gift of a whole life policy protects them, while also starting a nest egg that he/she can borrow against in the future – perhaps to assist with the down payment on a first home. The policy accumulates cash value as long as the premiums are paid, and at age 25, the cash value of the policy is typically equal to or greater than the policy premiums paid.
- Guaranteed insurability. Your child or grandchild will most likely have several opportunities to purchase additional/higher coverage as an adult, at the standard premium for their age group at that particular time. This means that even if your child or grandchild is unable to obtain life insurance coverage from any other companies, they can still be guaranteed coverage under the child life insurance policy that you purchased for them.
Protecting a child’s insurability is so important because when people get older, they can develop illnesses and health complications that can cause nearly all life insurance companies to disqualify them from being eligible for life insurance. Purchasing life insurance for your child or grandchild now, while they are the healthiest they are ever going to be, that they can carry with them into adulthood, is one of the best gifts you could ever give the special child in your life.