My clients always ask me ‘why would I get life insurance on my kids, isn’t that strange?” The truth is it isn’t as strange or morbid as you might first think. There are a lot of reasons why everyone should have some life insurance coverage in place but for children the main benefit is that you are ensuring their future insurability. Getting insurance once you’ve developed a medical condition is very difficult if not impossible. If you get your children insurance while they’re young you will be saving a lot of money and ensuring wealth and peace of mind for your kids. Of course no one wants to think of the worst case scenario but with insurance in place on your kids you are also protecting yourself against expenses and lost wages in case of the death of your child.
The Best Insurance Products for Children
When it comes to purchasing life insurance for kids I always suggest a permanent insurance product and Critical Illness protection.
Permanent Life Insurance for Children
This is the most expensive option but it’s also the most comprehensive and really the only one that makes sense for children. You can choose Whole Life Insurance or Universal Life Insurance. The best choices in my opinion are 20 Pay Whole Life Insurance and Universal Life Insurance, here’s why!
20-Pay Whole Life Insurance is a policy in which you pay premiums into it for 20 years but your child will be covered for life. This type of insurance product has a guaranteed cash value which means that at the end of 20 years, if you need to cancel your policy you will receive the majority of the premiums paid into the policy. It also has a Paid Up Value, which means that if you want to stop paying after 10 years, your child will still have life insurance coverage for half the amount of the original benefit. Of course, I don’t advise you to cancel a 20-Pay policy and this option is great because you won’t have to pay premiums forever and there is no risk to you. As of 2013 the price for a 20-pay policy with a face value of 250,000 on a 4 yr old is as low as $70/mth.
A Universal Life insurance policy has an investment component to it. That means that you can add extra cash into the policy each month or each year and essentially create a tax free savings account that can be accessed later on by your child. The accumulating funds can be invested in mutual funds or GICs, and they won’t be taxed until the child draws it out. A policy like this one allows your child’s life to be covered and also gives you a tax sheltered savings vehicle. As of 2013 the price for a UL policy with a face value of 250,000 on a 4 yr old is $42/mth.
Critical Illness Insurance for Children
Unfortunately, critical illnesses are always on the rise and the people affected by them are getting younger and younger. The insurance companies all realize this and accordingly, they have increased their prices for critical illness protection. If you buy critical illness insurance protection for your kids you are saving a lot of money because the premiums are much lower for younger people. This is so important because if your child were to develop a critical illness you would want to do anything possible to help your child get the medicine and treatment they need. These treatments and special medical needs require a lot of extra funds and a CI policy can greatly assist with that. As of 2013 the price for a CI policy with a face value of 50,000 on a 5 yr old is as low as $27/mth.
