How To Secure Life Insurance Coverage For Your Child
Preparing children for a life of financial security in the future is a priority for every parent. Many parents approach this in different ways, from starting a dedicated piggy bank account to set up a trust fund or any number of other alternatives. Of all the various methods though, none of them is as beneficial as getting life insurance coverage for your child.
Understandably, life insurance is something that people usually associate with older people, but that’s only because most people aren’t aware of the benefits that accrue to people with life insurance regardless of their age. As a result of increasing awareness of the benefits of life insurance from a very young age, more parents have been taking the step of signing their kids up for life insurance, and here are a few reasons why you should, too
Benefits of Life Insurance for Children
- Securing their Future Life Insurance – If you already know the benefits of life insurance, then you will certainly want your children to have life insurance when they are older as well. Getting them life insurance as kids will make getting a policy in the future a seamless process. In fact, in some cases, they might be able to get a life insurance policy without a medical examination or proof of health. This would be where there is a Guaranteed Purchase Option benefit included in the insurance plan that you purchase.
- Less Expensive Premiums – Insurance companies take a variety of factors into consideration when setting the premiums for life insurance policies, but some of the most important ones are age and health. When you purchase a life insurance policy for your child, you get the benefit of starting off with much lower premiums and locking in those lower fees for the entire term of the policy, subject to changes that may occur in accordance with the terms of the policy. What you and your child benefit is that you get the same degree of protection over a longer-term but at a lower cost than if your child was getting the policy as an adult.
- Value Accumulation – The way a permanent life insurance policy works is that it accumulates cash value every year, and the longer the amount is allowed to accumulate, the longer it will be. A person who gets a policy as a child will have accumulated far more than someone who waits till adulthood to get one, and that can be the crucial difference between financial security in the future and not having enough money. This is especially important because a higher proportion of the premiums paid goes toward the cash value of a younger person versus one who is older.
As the child grows older and the cash value associated with the policy increases, there are a few things they can do with the policy. If in need of money to finance college, make a down payment for a home or sort out emergencies for instance, they can take out a loan against the policy. Universal life policies also give the insured person the ability to withdraw sums of money that are tax-free, up to the surrender value of the policy, and if they want to surrender the policy in its entirety, they can do so and get the full amount that has accrued, minus surrender fees and any other payments, which could include tax.
Choosing Between Term or Permanent Life Insurance
The first thing you’ll need to do when you want to secure life insurance for your child is to determine whether you want to have a term or permanent life insurance policy. A term policy is one that has the coverage limited only to a specific period, say 20 years. The premiums are usually guaranteed to stay the same for that period (although they generally increase upon renewal since the insured person is older and thus more high-risk from the insurance company’s perspective) and there will be a pre-determined death benefit to be paid to the insured person’s beneficiaries if they die while the term is still pending.
Permanent life insurance, on the other hand, is just what it says – permanent. It lasts for the entire lifetime of the insured person and even though it usually costs significantly more, it has a couple of crucial benefits. First, there is the assurance that benefits will be paid upon death, whenever that occurs. Secondly, there is an investment element which ensures that beyond the benefit that will be paid upon death, the insured person also gets some benefits while they are alive. That investment element is usually tax-privileged, which also helps to maximize the amount the insured person will get during their lifetime and increase the chances of financial security.
As a parent, ensuring that your child has the financial security to make their way through life is probably a priority for you, beyond the traditional benefits which are paid upon an insured person’s death. To achieve that, a permanent life insurance policy would probably be the best option for you, helping you to set aside money for your child’s future needs, whether that is going to college or any other goals in the future.
How to Get Life Insurance for your Child
It is important to conduct a thorough evaluation of the financial circumstances of the family before getting an insurance plan for your child. This is because you’ll have to pay the premiums consistently to ensure that your child gets the maximal protection and benefits, so having a budget for the premiums will help you decide what type of child life insurance to get, the term, the face value of the coverage and any other factors which might impact the amounts you’ll need to pay as premium.
As you begin to shop around for a policy, it’s also advisable to reach out to expert insurance advisors who will be able to help you make the best decisions and get your kid the best policy possible. Keep in mind that the decisions you make regarding your child’s life insurance will have an impact on their lives for years and decades into the future and even possibly their whole life, so be certain to get the best guidance you can.
If you believe you require an additional life insurance policy or you’re buying your first life insurance policy for yourself, family, or to help you through the Covid-19 pandemic outbreak feel free to reach out to our professional agents and see what health insurance program might be right for you, that can help you through this time. Call Vivna, Inc. today to learn more here: 866.793.2301