If buying Life Insurance for your child, how does it protect that child?

This seems ironic for me?

I saw a commercial that offers Life Insurance for your child. The price is cheap. Anywhere from $1.00 a month to $5.00 a month.

If your child dies, then the beneficiary will recieve a lump sum, like $$50,000.00. So where does the protection for that child take play? In all respect, the child is dead and doesn't need cash, and the beneficiary becomes richer.

Yeah, it will help pay for funeral costs, but at a time of grieving, funeral costs are not important. People manage to get the money regardless.

Health Insurance is to help protect your child by paying for the medical expenses.
As far as life insurance goes, it will help pay for the funeral. Funerals are very expensive. Some people can't afford a lump sum payment.

Hi, your friendly insurance guy here again. :)

There are several benefits to having life insurance on a minor. Many of them have been mentioned already. Some have not. An incorrect or unhelpful item or two has also been posted.

I'll try to consolidate the actual mentioned reasons, add the missing ones, and correct the erroneous or poorly considered ideas.

Benefits:
1. It protects the insurability of a child. If you have ever tried to get insured you are probably aware that application is usually accompanied by questions, blood testing and urine testing, at the very least. Smoking, heaving health issues, being on certain medications, and simple aging all make it more difficult to get approved for insurance. Locking in insurability at a young age helps decrease the chance of a child not being able to qualify when he or she is an adult and ending up without any insurance due to an unforseen health issue. Add-ons, called riders, can be purchased to allow the insured child to not only keep the insurance in place, but buy more insurance regardless of health. In other words, if the child has $25,000 of coverage and a "future insurability rider" he or she can buy more at certain ages. The insurance company cannot say no, even if the person is, say, undergoing cancer treatment. This can be helpful if the child lives to adulthood, marries, has kids, and is then diagnosed with a terminal illness. Ordinarily no insurer would grant more coverage. With the already existing coverage and riders, the person might be able to buy a lot more insurance to make sure his or her kids were going to receive, say, a college trust fund - all because the policy was purchased when the person was a child.

2. Pays funeral costs in the event of death. Yes, the death of a child is a tragedy. Taking a several thousand dollar hit to the bank account on top of that is just heaping pain on top of pain. The proceeds of a life insurance policy can help defray that cost or pay it entirely. Remember - it's not there to make the survivors wealthy. It's there to make sure the survivors are not left with bereavement AND new debt, too.

3. Cash accumulation - some life insuance accrues cash value over time that can be available in tax advantaged ways to the owner. If the child lives to the age of majority and receives ownership of the policy, the accrued cash becomes available to the child.

4. If a child has, say, $100,000 of paid up whole life insurance when he or she turns 21, on top of any other benefits this represents $100,000 of life insurance need the person already has satisfied and will not have to repurchase. For example, let's say little Timmy gets insured as an infant and, at age 21, has $100,000 of paid up whole life. If, at age 30, Timmy owns a house, has a spouse, and 2 kids, and wishes to have $1,000,000 of life insurance, he only needs to buy $900,000 to reach his goal. He already has the first $100,000 take care of.

Useful things to know:
1. As another poster said, insuring a child is typically best left as an addendum to be undertaken after a family's other financial needs are met.

2. King Bu$h's post indicates only that he assumes, incorrectly, that there is only one useful form of life insurance (term). Insuring a child's life is something you do with the hope of seeing the long term benefits to the child as a living adult, hoping to never need the death benefit while he or she is a minor. As such, term inusrance is entirely NOT the appropriate form of insurance to use for this purpose. Whole Life would be a far more valuable choice, particularly because the cost to insure young children is so low.

3. Using Whole Life insurance as a college savings vehile does have some merit. The 529 plan is typically a more valuable choice, as mentioned by another poster. Whole life does have a few advantages over a 529 plan, however. First, monies spend on the whole life serve several purposes at once - savings and insurance. Second, 529 plan values count against the child for computations of financial aid availability. Cash value within whole life policies does not. Third, and no one likes to think of this, not all kids go to college, in which case all the tax advantages on withdrawal of the 529 are lost. I'm not suggesting that Whole Life is a better choice than a 529 plan. I am simply pointing out some of the advantages it enjoys comparitively. The 529's major advantage is that since it is an actual market investment instrument, its growth potential vastly outstrips that of a whole life policy, which is an insurance contract, not an investment or security in the first place.

Overall, assuming a family's needs are met in other regards, I recommend to all my clients that they purchase small, 10-py or 20-pay whole life policies on each child at birth. It protects the parents, and if the expected outcome happens (the child lives to adulthood) it helps the child, too.

Consider - how many of you reading this are parents of minor kids who would be in better hsape if you had an additional $100,000 of life insurance because YOUR parents had bought it for you when you were born? Wouldn't it be helping you with your insurance program now because they bought if for you way back then?

It doesn't protect your child AT ALL. It just provides some funeral costs. And you could buy term coverage much, much cheaper. Maybe $50 a year for $250,000 coverage.

$50, 000 is an excessive amount on a child with no debt, however if this is a college age student, and they have student loans, this is not an unreasonable amount.

But for your typical 5yr old, $15,000 is probably more appropriate. This type of term life policy is very inexpensive because the risk to the insurance company is practically nil.

However, take into account what will happen if your son or daughter dies. In your emotional distress you will be put into the position of disposing of their body according to your cultural standards. This is an amount that would allow for you to not be in your right mind when you are making horrible choices of service, casket and burial plot. Typical funerals may cost less than this, but someone please tell me what is "typical" about the death of your child?

Insurance is for the living, buts it meant to pay bills and settle estates, not be a money maker. Any insurance agent that tries to sell you something so excessive for a child is simply padding their commission, unless they can prove why you would need such a high amount.

You paid the cost of a funeral lately.
I have. Over $8000.00.
I really could have used $50,000.
It still would not pay medical bills outstanding stilll. Mother was 90. You try getting insurance at age 55 or older and see your payments. Fifthy years ago $5000.00 was a lot of money.

20 years from now even $50,000 probably won't pay for burial.

It does protect the child in many ways.
It ensures proper burial- You might spend every time you have on medical bills prior to death.
Also most policies have an annunity-cash amounts.
Also that policy guarantees that child will have insurance coverage in case the child can't get coverage at an older age due to health problems or you get buried.

Insurance protects all concerned.
Some policies allow you to draw up to 80% of face coverage in advance in event of serious illness likely resulting in death.
Might even save your home and provide a place for that child to stay. Children die daily-sad as it is.

Yes, that is the nature of all life insurance. It does not matter if it is for a child or an adult.

We all die.

Life insurance is the only type of insurance for something that will always happen. Other types of insurance are for things that might happen.

If you die and are resuscitated, can your beneficiary collect your life insurance?

You are basically correct, it doesn't much protect the child. However, if that plan is whole life, the policy can be paid off and be borrowed against by the insured when he/she gets older. Also, it might, as most do, protect from loss of limb, in which a person does not have to die. If the policy is whole life and the person reached adulthood and marries and has a family, the family has protection against mounting bills that the family may be liable for. You must take a good look at the policy, and in all honesty, if you manage your child's money and contribute to a tax free fund for him/her, you are better off. If you cannot manage to save on your own, maybe a policy is a good thing, because it comes as a "bill" for the premiums, forcing a parent to pay it. Get some smarts, and invest in your child's future on your own, as the payout is way greater.

What do you think life insurance is for? Not for the child.

As an insurance advisor I typically advise people to only buy insurance on a child after the families other many needs are protected. Including the parents being adequately insured, an emergency fund established, retirement and savings plans in place. The death of a child while devastating would not typically but a family in financial jeopardy. Life insurance is not typically a good tool for college savings due to its low return on investment. There are several better methods including 529 college savings plans. The one really good thing that comes of insuring a younger child can be to preserve that childs insurability. Buying a policy on a young healthy child, can make sure the child has some life insurance during their lifetime regardless of any changes in their medical condition or health changes.

Life insurance for children may have a positive benefit for the child - actually the beneficiaries of your child when they are grown.

Why? Because, some life insurance policies for children guarantee their insurability - it guarantees they will have life insurance as an adult.

So, if they develop a health problem in the future and are unable to purchase life insurance when they grow up, your child may still have their policy you started for him/her.

Also, some of these policies double in the amount of coverage once the child reaches a certain age.

Here is some specific information that applies to your question - taken:

"Coverage that is there when you need it
Begin the coverage now for your child or grandchild and you can guarantee your teen permanent protection, regardless of future changes in health, or any other situation. The planâ€™s guaranteed cash benefit will help protect you and your family if an unexpected tragedy occurs. You are the owner of the policy until the child becomes 21, when you can transfer ownership of the policy to your child.

Guaranteed more protection later
Best of all, more insurance is guaranteed to be available later. Even if unexpected health problems (or anything else) cause other companies to say "no" when your child is an adult, your teenager will have the option to buy more coverage at ages 21 and 28, at the regular rate for those ages.

With a $5,000 Young Adult policy in force, your adult child is guaranteed the right to buy an additional $10,000 of insurance at age 21 and again at age 28, for a total of $25,000 of life insurance protection. A $10,000 policy provides a total of $50,000 ... a $15,000 policy a total of $75,000. All when it may be needed for new adult responsibilities."

I hope that helps.

Life insurance never protects the insured. It protects those who depend on the insureds income. In the case of a child, it doesn't actually protect anyone.

Life insurance is a rip off. How do you think they make money??

When the term ends you didnt get anything and you have to start all over again

Yes it is a scam perpetuated by the insurance industry. You are gambling that your child will die, they are gambling that he won't. It's nice to have enough money for the burial, and if the child lives, some policies will let him, cash them in. In the long run the insurance company makes more money from your money, so who do you think is the big winner?

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