Personal Finance

Should I Buy My Child Life Insurance?

| by Ed Hinerman

The whole subject of life insurance on children has a certain "yuk" factor that comes with it. Parents, even those who would be hard pressed to deal financially with the loss of a child, would really prefer not to talk about it.

I would like to throw out just a little different spin, a consideration that parents probably never get to because their first reaction when the subject is brought up is to stick their fingers in their ears and go, la la la la la...

For now let's set aside the death benefit and the very thought that children die prematurely. Most life insurance policies for children have a guaranteed insurability rider that states that when they reach a certain age, usually 23, they are guaranteed that they can increase the policy size to a grown up amount without evidence of insurability.

To put this in perspective consider this description of a real product. For a $250 one time payment your child between the ages of 0 and 13 will have $5,000 worth of life insurance. At age 13 without any additional premium the life insurance increases to $10,000 and at age 18 it increases to $15,000, again with no further premium. At age 23 your child can convert the policy without evidence of insurability for up to $100,000 of permanent insurance. Double the premium to $500 and all of those values double as well.

The key, and the great thing about this policy in my mind is not the small price tag, or the fact that the death benefit increases with age, but the conversion option. For just $250 you have locked in the gift of insurability at a low rate for your child. This is huge if your child develops type 1 diabetes, a congenital heart defect, epilepsy or cancer of any kind. There are so many things that might not take our child away from us, but can send them off into adulthood without the ability to buy life insurance. If it isn't guaranteed through a policy that is already in force, the will simply not be able to purchase insurance.

So, for those parents who just don't want to consider insuring their child's life because, well, because it's such a morbid thought, consider giving your child a gift that could be huge to them and their children in the future.

Bottom line. Personally I think carrying life insurance, especially at the low costs available is a prudent thing to do unless you just have plenty of disposable cash to deal with an unfortunate loss. If that part still turns you off, then make some charity the beneficiary and still give your child a future gift.