March 26, 2018

Do Children Need Life Insurance?

Traditionally, life insurance has been perceived solely as a means to replace a loved ones’ income in the event of his or her death. From that standpoint alone it doesn’t make a lot of sense that it would be beneficial for children to have life insurance protection; but, the truth is there are a variety of important reasons to purchase a children’s life insurance policy.

Funeral and Burial Costs

Most people don’t want to consider the possibility of losing a child, but, tragically, this does happen. With the average cost of a funeral someplace between $7,000 and $10,000 (, the emotional devastation can be exacerbated even further by the financial burden of finding a way to pay for final expenses. On top of these costs, consider other causes of financial hardship during this difficult time including counseling costs and even unpaid time away from work. Additionally, if your child passes away after battling an illness, you could have significant medical bills to pay which the life insurance policy could help cover.

Finally, even if you have enough savings to cover all of these costs, many people who have lost a child find that doing something charitable in the child’s name and memory is a worthwhile way to help manage their grief. Having a life insurance policy on the life of the child could allow you to fund a scholarship, help a park, or do something else meaningful to memorialize your child for years to come.

Protecting Future Insurability

Fortunately, the vast majority of children will live to adulthood; unfortunately this is why many people believe that life insurance for children is not important or necessary. While healthy, young adults will likely be able to purchase life insurance at standard rates, there are many situations that can occur later in childhood or in early adulthood that could affect one’s ability to do this. Accidents, physical and mental health issues, and occupations can all have an impact on whether or not someone is insurable and, if so, how much their insurance will cost.

Because, ultimately, no one really knows what will happen in the future, buying life insurance for children while they are young and healthy can help guarantee them coverage at an affordable price long into the future. Most children’s life insurance policies offer the ability to convert to permanent plans of insurance or even increase the face value of the policy without evidence of insurability—which can include answering health and lifestyle questions or even a physical examination. Generally speaking, the earlier in someone’s life that life insurance is purchased, the better the rate they will receive. As many people won’t buy life insurance until they are in their 30s, the chances that something could affect their insurability or rates are higher than may be assumed.

A Valuable Gift

For many parents, the thought of funding a life insurance policy throughout their child’s adolescence merely to have it cashed in during their first semester away from home is a deal-breaker. Fortunately, many times the parent is able to maintain ownership of the policy until a point in time when they feel the child is responsible enough to handle it. Parents can then present their child with the valuable and lasting gift of life insurance at the time of his or her wedding, the birth of a child, a milestone birthday, or during another significant life landmark.

With this in mind, parents may want to consider purchasing a policy worth more than would be needed at the time of purchase so that it will be large enough for the future. Keep in mind that inflation over the course of your child’s lifetime could be substantial and therefore should also be taken into account. Many policies offer a guaranteed insurability option rider which allows the insured to purchase additional insurance at specified ages at standard rates, regardless of any changes in health. A rider like this can be important when purchasing a policy many years before it is expected to be used because it allows the policy to grow along with someone as they continue to increase their income and their need for life insurance protection.