Many parent are uneasy when it comes to thinking about Life Insurance for their children. No loving parent wants to consider the unspeakable thought of losing a child, and they know that no amount of money would compensate for their loss.
These are all natural and reasonable reactions to the subject. Unfortunately, tragedies happen much more often than we care to admit. According to childdeathreview.org information, 44,596 children died out of the total child( age 0-19) population (83,267,556) in 2010 alone.
While the numbers in a “will it happen to my kids?” mindset may seem small every year. I can assure you that percentage number is no comfort to those who lost their children.
What good can Life Insurance do you ask?
In the worst case scenario it can financially help the parents and siblings through the grieving process. The uncovered medical expenses for the treatment of a sick or injured child could potential bankrupt a family. The grieving family many times would like to help prevent the illness or injury that happened to their child. Life insurance funds could help do just that. It could also help supplement for the loss of income and cost of family grief counseling.
Now that we have had our dose of reality let’s look at how Life Insurance can help the vast majority of children who will enter adulthood.
First and foremost we want to help protect their future insurability. Life Insurance is an extremely powerful tool in both personal finances and business finances. Unfortunately, there are many health conditions that can compromise the ability to obtain Life Insurance or the affordability. Therefore, having a policy in place at a young age can save them money in the future and may offer guarantees for future purchase with the same carrier.
Last but certainly not least is the cash value. If the child is the primary insured person than you will be looking at a policy that has cash value. This cash value can grow beyond the total cost of the policy and therefore be a source for funding college, weddings, home purchase, or a head start on their retirement planning.
These funds grow tax differed and can potentially be used tax free. Also, since a parent must be the owner of the contract the child will not have access to the funds unless the parent gifts them the contract in whole or accesses the funds themselves and then gives the funds to the child.