No kidding: Life insurance for children makes sense


No kidding: Life insurance for children makes sense

We get it: Life insurance is a little tricky to talk about.

You have dental insurance to keep your smile healthy and car insurance to get your wheels back on the road after a fender-bender.

But the reason for life insurance? Not exactly an upbeat conversation-starter. Top that with the thought of needing it for your precious child or grandchild, and you’ve got a major ick factor going.

But permanent life insurance for children can be a valuable investment. Here are some reasons to consider it:

  • It’ll never be more affordable. The younger children are when their coverage starts, the lower the rate. In fact, nearly half of those who purchase juvenile life insurance do so to lock in a low rate, according to LIMRA’s 2015 Insurance Barometer Study.
  • It protects their insurability. Buying whole life for a child protects him or her against the chance an unexpected accident or illness could make life insurance more expensive — or even unavailable — later on.
  • It can help provide a financial safety net. Permanent life insurance such as whole life accumulates cash value at a guaranteed rate as long as the policy is in effect. The policyholder can take out a loan against the cash value if needed for unexpected expenses or even to pay the premiums.

“Life insurance isn’t designed as a savings plan,” points out Pam Jenkins, assistant vice president for product and market development at Colonial Life. “But it can help play a role in providing a financial safety net, now and in the future.”

  • It’s stable. Interest rates have been low for years, and that’s likely to continue. Whole life’s premiums and cash value don’t depend on current interest rates as much as universal life or variable life, so it offers more stability.
  • It could keep your family out of serious debt. The average funeral costs $8,000-$10,000. At the same time, nearly half of American families say they don’t have even $400 on hand for an emergency. That may be one reason crowdfunding for funeral expenses has become one of the most common online fundraising causes, according to the website Nerdwallet.

“Nearly everyone is going to need life insurance at some point in his or her life,” Jenkins says. “Buying it as a gift for a child can be an affordable way to meet many needs.”

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