Do You Need to Buy a Life Insurance Policy for Your Child?

Every parent wants the best for their children, both in the present as well as the future. On the financial front, parents go through many investment options to find the most suitable financial plan for their children. The one question that often comes up is “Should I buy life insurance for my child?” There are contrasting views on this, but the benefit of such insurance is that it covers the child for his/her entire lifetime.

Buying life insurance can be intimidating, but once you get started looking into it, you’ll realize that it’s not as complex as some other major purchases you might go through in your lifetime.

Let’s take a look into what insurance for your child means: 

● Living benefits and cash value

By getting permanent life insurance for your child, you are building a tax-deferred savings vehicle that he/she can use later in life. The cash value of the policy is something that the child can borrow money against or even surrender to withdraw money at any stage in life. This becomes a dependable source when your children need funds for higher education, a wedding, or even down payment for a home—thus ensuring that they have money for any important event in life. Moreover, you can use policy loans that are tax-free. While there are surely several advantages with regard to the cash value of a life insurance policy, sometimes the policy fees have a major impact on the rate of return. Know that there are other saving avenues for a child’s college fund, so evaluate all your options carefully before investing.

● A locked-in rate for a policy

Although the choices in insurance policies are many, the one advantage of buying life insurance for your child is that you get the chance to lock in an affordable rate for the entire life of that policy—and considering the escalating cost of everything in today’s time, this can be a great cost-effective advantage. As long as you keep paying the required premium, the policy will remain valid.

 ● Future insurability

A major reason why parents opt to buy life insurance for their newborn children is that it guarantees insurability for the kids in the future. A child who has just been born will not have a history of pre-existing medical conditions, which means that he/she can get full coverage without any exclusion. This may not be possible if the child already has an illness a few years later. But if you purchase a life policy soon after birth, the coverage will stay for as long as the policy is in effect, even if the child develops a medical condition later in life as an adult.

● Resources for funeral expenses

There are different kinds of insurance policies for children, and life insurance is the one that gives a payout in case of permanent disability or death. While this is not something any parent would like to think about, there are costs involved in funeral rites and end-of-life expenses. Not every family can afford such sudden fund requirements, and child life insurance can come handy. Of course, there can be no price on a child’s untimely death, but having a financial resource like this can let parents take time off to grieve and manage bills during a difficult time.

On the other hand, an insurance policy is primarily meant to replace the salary of a working adult. Since a child has no income, many people are of the view that getting life insurance is not necessary.

This debate shall perhaps always continue, and the fact is that there is no “right” answer to the question of whether you should buy a child life insurance policy. The smartest move is to consult a knowledgeable financial advisor to weigh the pros and cons and chalk out the best course of action for your child’s financial future.