The minute my child was born, I wanted to get her a life insurance policy. In fact, I was excited to get her coverage. It’s not often someone thinks about putting a policy in place for a newborn that is built around their death. No parent ever wants to see their kids pass before they do, and it’s a thought we certainly want to keep out of our heads.
Despite all the morbid thinking when it comes to life insurance, there are some reasons why a parent or grandparent may want to consider obtaining a policy for a little one:
Future Health Risk — One of the items in determining the cost of life insurance is an individual’s health. The healthier you are, the better the rating you receive from the insurance company. The better the rating, the cheaper the cost. It’s similar to a credit score, but a health analysis dictates the price of coverage. For many who are lucky, a newborn comes into this world with few or no health problems. As we age, our health begins to deteriorate. Will a newborn a few years later all of a sudden become extremely unhealthy? The odds are very low, at least according to the insurance companies actuaries. However, could a toddler develop ADHD? Could they one day be diagnosed with Autism? Perhaps at some point there are early signs of bi-polar thinking or depression. These are the types of conditions a pediatrician cannot diagnose in the very early stages of a child’s life, but something that would be discovered years later. Putting an insurance policy on a newborn sooner rather than later, removes any health risk disrupting the ability for a child to be insured in the future.
Low Premium Cost Today — The absolute cheapest life insurance premium you could ever pay, is on the day you are born. With each subsequent year that passes, we are one more year closer to death. Unfortunately we all will die one day. We do not exactly know when that will be, but we do know with every passing year, we do get closer to that moment. When you purchase a life insurance plan for a child, the probability of their death is lowest, meaning insurance carriers offering up their cheapest coverage. The longer we wait to put a plan in place, no matter how healthy we are or claim to be, the cost will automatically increase.
Cash Accumulation — A juvenile life insurance policy is what’s known as permanent insurance. This can be in the form of whole life, universal life, or indexed life insurance. They are called permanent policies because as long as the policy is maintained, the death benefit is paid out no matter when the person passes. There is no term or expiration dates with these types of plans. Within a permanent insurance policy, there is a living benefit called cash value. Over time, the cash within the policy is expected to grow, and it can be utilized by the policyholder through a withdrawal or a loan. As time progresses, the amount of cash available is expected to be higher than what was put in, resulting in money gained. The owner of the policy has access to the cash value which can be used for anything — there are no restrictions (tax or penalty) like a retirement plan or college 529 plan. Over time, this plan can be gifted to the child, now of legal age, and they can use the cash for items in their adult life like education expenses, a car purchase, wedding costs, and even retirement.
Funding Future Generations — Now for the elephant in the room….the death benefit component. I do not view this policy as a safety net in case god forbid our children did pass away early on in their life. I view this policy as a guarantee of finances being provided to future generations. With every policy in place on a generation, another generation benefits. For my own situation, I have a number of life policies in place. This is done to take care of my spouse, and now, my daughter. With insuring my daughter, I have in effect, also insured her future kids without her even knowing. If I am lucky enough to have grandchildren one day, I would hope my daughter also insures her children, but she does not have to worry — I already plan to insure the grandkids. Insuring the grandkids, which as you may have guessed it already, provides funds to my great grandkids, who I will most likely never meet. With every family line insured, future generations continue to thrive and benefit from a tax free death benefit.
In a follow up piece, there are more details about juvenile plans, companies, and how the process of obtaining coverage works. The link to that article can be found here: https://steemit.com/lifeinsurance/@vibrantlife/i-m-interested-in-juvenile-life-insurance-what-s-next