Life Insurance For My Children?

Someone asked me the other day, “Ted, is it morbid to ask you whether I should buy life insurance on my children?”   It was an interesting question, and one we often get from parents.   The American Council of Life Insurers says that only about 15% of the people under the age of 18 have life insurance.  An average policy for people under 18 is around $5,000 with the primary purpose to cover funeral expenses and burial costs.  There are varying schools of thought on this subject in the financial community, and here are some considerations to think about around this subject.

Remember that you as the parent are the real wage earner and the person that needs to be insured the most.   It is not recommended to buy life insurance on your children until you are adequately insured.   Since children for the large part don’t earn wages, any additional cost will be an extraneous expense to your budget.

On the pro side of this argument, it can be very legitimate to purchase a small policy to cover funeral expenses, burial costs, and other expenses at the death of a child.   If you work for an employer with a quality group benefits plan, you may be able to purchase a unit (generally $10,000) through work for a cheap price.    If you have a current policy such as a whole life or universal life insurance policy, you may be able to add a children’s rider for a few bucks to accomplish the same goal of having money in case of a premature death.    Some parents have started a permanent policy where they save from $25 to $100 a month that builds up some cash value generally with a face amount of $25,000 to $50,000 in death benefit.  This can be seen as an alternative savings plan for your kids, and in addition may allow your child to have a permanent policy without having to prove evidence of insurability down the road.

On the con side, nobody wants to think about the death of their child or even remotely consider what may happen financially.   If you think statistically about the probabilities of a child passing away, the percentages are so small that it may not be a quality financial decision at all.   Even if the premiums are very cheap, every dollar you don’t spend on insurance could be put towards a college savings plan.

There is never a wrong or right to this decision.   Looking at life insurance as a whole can be a tricky part of building your financial plan.  Remember that most term insurance policies will be the same price for a child under 18 no matter what their age (i.e. 9, 11, or 15), and some companies like Genworth will offer a 30 year term policy on a child under 18.   If you have more questions, e-mail me by clicking here

Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®

Co-CEO and Founder oXYGen Financial, Inc.

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About the author  ⁄ Ted Jenkin @ Your Smart Money Moves

Ted Jenkin @ Your Smart Money Moves

Hey!

My friends and family all think I’m a workaholic, but I say I’m just a guy that loves to help people do better in life.

My mother is still the only one that calls me by my real name Theodore Michael, my wife calls me Teddy, but for the rest of you it is just plain old Ted.

Ever since I was a little kid, I always loved money and being an entrepreneur. In fact, I still have cassette tapes of me talking to my grandmother at the age of five and my mother tells me all the time how much I played with money as a kid...

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Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

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One Comment

  • Avatar
    David H.
    March 7, 2010

    Most often, people don’t like to think about their own death, let alone the death of their children. But the early permanent life insurance is a way for parents to not only provide for their future while insulating against financial loss in the event of the child’s death, but it is also a great way to teach children financial literacy and responsibility. Something which you don’t see much of these days and would help put them out in the front of the race.

    David Hoag
    http://www.80-percent.com/common-objections-to-buying-life-insurance/

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