Looking for life insurance for children? Here are some things you may consider.
Make sure you know ‘why’ you’re purchasing insurance on your children. Unlike adult coverage, life insurance for children is rarely about covering a current insurable need.
Instead there’s two common reasons for putting life insurance on children. First is to guarantee future insurability. By purchasing a policy on them when they’re young you ensure that the coverage is in place in the future when they’re older – even if they become uninsurable. This can become particularly important if anyone in your family has a history of becoming uninsurable.
Secondly is as a financial gift to them when they’re older. Purchasing an inexpensive policy when they’re young can result in the gift of either an inexpensive policy or a fully paid up policy when they’re older.
Life insurance on children is commonly purchased in the form of a whole life policy. Also commonly, these whole life policies are ‘quick pay’ or limited pay policies. These policies have premiums for a defined period of time, after which the policy has no more premiums required. This works well as it allows parents to pay the premiums when their child is young and then gift them a policy when their older that has no further premiums payable for life.
Another common feature of whole life insurance policies for children is the ability to get increasing coverage over time. Some policies for children have dividends paid annually. These dividends can be directed to automatically purchase additional units of life insurance under the policy. The effect of this is that the whole life policy coverage increases roughly with inflation over time. This is particularly important if a child becomes uninsurable – these policy dividends may be the only way they can get additional insurance.
Another way to purchase life insurance on children is through a child’s protection rider on the parent’s policy. This coverage needs to be purchased at the same time as the parent’s coverage and generally can’t be added on later. It’s inexpensive, however expect coverage amounts to be limited. It’s also coverage that is closer to term life insurance than whole life, so many of the benefits listed above (increasing coverage, quick pay premiums) will be unavailable. It also expires when the child reaches adulthood.
If you’d like to discuss particular policy options for your children and get quotes, please call an experienced life insurance broker at 1-877-344-4011 or email us at firstname.lastname@example.org.