Life Insurance for Kids: Benefits and When to Consider It

For most parents, it may sound silly and ominous to buy life insurance for their children. But after all, the life has at one point been regarded as security in supporting dependents in instance of death of the bread winner. However, there are several quite valid reasons for parents and grandparents to go for life insurance for children and knowing these can help you to determine if this long-term financial investment is good for you.

Understanding life insurance for kids

Life insurance for kids is usually a whole life insurance plan with continual lifetime indemnification while accumulating the cash value perpetually. As for term life insurance that people have a definite date after which it becomes null, whole life insurance for children lasts as long as the premiums are being paid. The beauty with these policies is that you get to fix a premium rate at childhood, and the insurance company has to cover the individual in the future regardless of any health complications that show up.

Contrary to what some may think, life insurance for children does not compensate for any lost income in the slightest – in fact, it’s more of a personal finance tool that can be highly advantageous when a child grows up. 

Key benefits of life insurance for kids

Guaranteed insurability is by far the biggest benefit of purchasing life insurance for the kids. This benefit is useful because the Child will be provided with life insurance for his/her life span no matter what the Child may develop in future illnesses or complications that may make it costly or undesirable to pay for the policy. Imagine this: Your kids have long term illnesses or you take a dangerous job; And If you are already over 40 your chances of getting renamed are going to be precarious or really costly.

However, another advantage of whole life insurance for kids is that it also includes an element of cash value. This policy earns tax deferred cash value that can be used through loans or withdrawals at given times in future. This category of financial capital would have a role of financing major life events of people such as college education, or starting a business or making the first down payment on a home. The cash value may not have growth rate that will correspond to that of the aggressive investment, but in terms of a good financial backing, this is well assured.

When to Consider Life Insurance for Kids

When thinking of life insurance for children, timing is important. The earlier you buy coverage the better according to many financial experts, because the premiums are lower and you'll have a longer amount of time to build cash value. But life insurance for kids may find itself worth considering in several specific situations.

The decision making is often determined by family health history. If you know of any genetic health conditions within your own family, purchasing coverage for your child when they are young and healthy will guarantee that they have some protection in place, whatever happens with their health in the future. For families with histories of conditions which could make life insurance difficult or expensive in the future, this is particularly important consideration.

Buying life insurance for kids should also be affected by your financial goals and other family planning strategies. If parents or grandparents are looking to leave a money legacy, or pass on a little seed capital to kick off their kids’ money making, a policy could be chosen. The cash value component can become a forced savings vehicle and while it may not entirely fund future educational expenses, it may pay for some, and help with other financial needs.

Another aspect is that too many major life transitions happen simultaneously. Some choose to buy a life insurance for kids upon the arrival of a baby, while others may choose to purchase the insurance as a child begins school or reaches a certain age. The trick is to find a balance between wanting early coverage now and your current financial situation and what you want over the long term.

Knowing the Cost and Commitment

Life insurance for kids certainly has several advantages, but you also need to see the financial commitment. Premiums for the policy must be paid so that it continues in force for many years, until the child can assume the responsibility for them. Before purchasing a policy, parents should carefully evaluate their budget and they should be sure they can pay the long-term premium.

The rate of life insurance for the child can vary as per factors such as the coverage amount, life insurance provider, etc., however, the cheapest policy is the one that doesn’t charge any type of additional riders or benefits in addition to the basic coverage. Premiums tend to be affordable but you want to select an amount of coverage and payment structure that fits your finances.

Common Misconceptions and Concerns

Among the critics a case is made that traditional savings vehicles or even education funds may actually be better investments than children’s life insurance policies. Of course, these alternatives have their advantages, but they don't possess the special mix of benefits that whole life insurance provides – such as guaranteed insurability and tax advantaged: growth.

Another usual worry is that there's no need for life insurance for children since children are not dependents or have financial responsibilities. But this point of view fails to take into account the long-term benefits and protection that early coverage offers. Kids' life insurance is more about insuring against a future need to buy life insurance and building a financial foundation for them.

Conclusion

When you get down to choosing life insurance for a child it is very important to partner with a reputable insurance carrier. In the world of digital life insurance agency, Ethos has grown up to be a leading insurance platform providing innovative solutions to families wishing to ensure their children’s financial future. Ethos makes their application process straightforward, their rates competitive, and they commit to being transparent to help parents better understand what coverage is right for their children.

Using Ethos's technology driven approach, the process of buying life insurance is simplified while enabling parents to make educated decisions around the life insurance they buy for their kids. They are focused on the customer and work hard to educate consumers about how life insurance can work in their plan for financial security of your family.