Child Life Insurance: Why it’s Worth the Money

Life insurance can be quite a sensitive topic, but more so when it focuses on insuring the life of a child. It is unimaginable to lose a child; therefore most people find it is impossible to think about protecting their financial interests in the event of losing a child. Whether parents have the means to afford a funeral or not, most parents would simply not want to talk about this subject.

However, the unthinkable can happen to anyone. That’s not all; there are several other really sound reasons to purchase life insurance for a child. Let’s see what they are:

Why purchasing child life insurance is worth the money
• Child life insurance is very affordable. You can choose between term and permanent life. Term policies can be very affordable, working out to just $10-$20 per year.
• On the contrary, funeral expenses can be quite unaffordable, if you don’t have the means. A funeral today costs anywhere between $5,000 and $10,000.
• If you don’t wish to buy a separate policy, you can opt for a child rider in your own life insurance policy.
• There could be a hobby or trait that will make your child’s life uninsurable in later years. Since child’s policies can be converted into an adult policy later on without proving insurability, it is a great back-up plan to have.
• Some health conditions like Type 1Diabetes, a congenital heart defect, cancer or epilepsy can make life insurance unaffordable. Having a child policy is a good way to lock in cheap premiums, and avoid having to prove insurability in adulthood if your child suffers from any of these.
• A child’s death can be devastating to a parent. While no financial benefit can offset the pain, ease your mind, or make you feel better about losing a child, a child’s policy can help you in small ways:
– Most companies give parents a few weeks off when a child dies, but sometimes it may take a while for them to go back to work, and quite understandably. The death benefit could help you take a bit longer, without having to worry about finances.
– Sometimes a child is ill before dying, and when health care costs are quite prohibitive, or not covered by health insurance, the death benefit can come in handy to cover these costs.
– In instances when parents find it very difficult to accept the loss, the death benefit can also pay for professional grief counseling.
– Many parents when faced with the loss of a child use the death benefit establish memorials or charities to help other children in need.
Should you buy whole life or term life insurance on a child’s policy?
While we have seen through the above reasons that life insurance can really be worth the money, should you buy term life or whole life? That is a very personal decision, but to help you decide, here is some additional information:
Child Term Life Insurance
• Term life insurance is very affordable, and even if it is temporary protection, it can be converted to an adult policy when the child grows up.
• Parents who purchase term policies on children usually do so for the sake of life insurance viz., to provide them with a death benefit that can take away the worry of finances while they grieve their loss. Some people think this is outrageous, and think that the amount spent on premiums could instead be utilized in a safe investment vehicle. However, there is nothing wrong in insuring a child for the sake of pure insurance reasons.
Child Whole Life Insurance Policies
• Whole life insurance is permanent life insurance, and will be with your child throughout his or her life. While whole life policies are more expensive than term life, purchasing whole life for a child is quite cheap, when compared to purchasing whole life for an adult.
• Parents who purchase whole life typically do so not just for the death benefit, but also as an investment opportunity for the child that will benefit them later on in life. There is a school of thought that says that over the course of time this investment won’t be able to keep up with inflation, making the current payments useless. However, some death benefit is better than none at all. Remember, it will have done its job during the earlier years, especially when you keep the next point in mind.
• Some parents are of the opinion that whole life policies can be encased if their children need money for college expenses. Some parents also intend to borrow against it, but this point is once again debatable, because when you borrow against whole life, you are charged an interest.
A child policy makes sense only if the parents’ lives are insured.
Buying a child life insurance policy is a very personal decision, but do not even consider buying a child life policy if you yourself are uninsured. The primary way to protect your child is by insuring yourself, because the chances of a child dying are quite slim when compared to chances of an adult dying. So, consider child life insurance only if you are insured yourself.
A child’s policy costs little, and it is a wise expense not just for the death benefit and the money to pay for an honorable burial. The ability to carry on the policy into adulthood is a great gift that any parent can give to their child.

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