Life Insurance for Kids
Teach your children about this important financial building block.
Life insurance for kids provides support and sets a solid foundation upon which kids can build. Here are some things you can teach your older children when explaining the importance of life insurance:
- Guaranteed insurability – One of the most important reasons to have your child insured is to protect his or her future insurability. That means your child is assured life insurance protection as an adult even if he or she develops serious health problems.
Health conditions can cause a person to be rated at a higher premium or even lose the ability to buy more insurance.
- Affordability– Life insurance for your child can be helpful for them financially in the future. Due to increasing mortality and other factors, life insurance premiums increase each year with a person’s age. By purchasing permanent life insurance for a young, healthy child, you can lock in a low premium rate that continues throughout your child’s life.
If your child waited to purchase the same amount of permanent insurance as an adult, his or her premiums would be considerably higher.
- Term vs. permanent – It’s important for your child to understand the difference between term life insurance and permanent life insurance. In a nutshell, term insurance covers you for a specified period of time – for example, 15 years. At the end of the term, you have the option to convert your policy to permanent life insurance or renew your policy for another term, typically at a higher premium rate.
With permanent life insurance, you’re covered for the rest of your life and your policy can accumulate cash value. More>>
- Cash value – Permanent life insurance plans can be used as an additional way to accumulate money. The cash value that builds up in a permanent life insurance certificate accumulates on a tax-deferred basis. Within certain limits, your child could borrow from the cash value later in life for emergencies, to buy a house or to help pay for a college education.
- Death protection – Life insurance is also important in case something should happen to your child. More than 50,000 young Americans under age 20 pass away each year, according to National Vital Statistics Records. Death – no matter the age of the deceased – can reap emotional and economical havoc on a family.
When you’re teaching your child about life insurance and explaining its importance, you help establish the values and responsibilities of protecting your family.