Buying Life Insurance on the Children

Every parent has to decide whether to buy life insurance on their children. While buying life insurance may not be an easy decision, the fear of not having it on your children may trouble you a bit.

    Congratulations you have just  become  the parent of a baby boy or girl, or even twins or quadruplets. You have many new worries including the health, welfare, and eating habits of your child. What about life insurance on your child? While it may sound silly to a select few, those parents who were unfortunate to have a child die of SIDS, a car accident, etc., may have a different prospective. No one expects their children to die before them but it can happen. It may be sudden or unexpected, but all of us must realize that one day we will all come face with death.    There are those who have perceptions that life insurance should not be bought on children,  because “the parents are wanting to get rich of the death of their child’s death.” Not having life insurance may cause a financial hardship in the case of a child’s death. Also who really wants a check in a situation like this. The premium may be small enough that it is worth having that protection in place. There is a simple solution to solve this problem,  just have enough life insurance on your child to insure burial expenses up to age 25 or so. Or if you have enough money in your personal account to bury any of your children then that would be another viable solution. As children go off to college is important to reevaluate their life insurance needs. If they are going to have student loans or plan to buy a home after college it is important to plan ahead. Many times in college, children can find  themselves uninsurable for any number of reasons. It is necessary to be conscious of this fact, in order to make sure they get on the right track to adequately have life insurance when they have a family.

    Remember life protection has its benefits, but it costs money. It is necessary to evaluate your own particular situation. If it makes sense that proceed in getting in touch with an insurance agent you can trust and rely on. As parents you should also evaluate your life insurance program!

Understanding Life Insurance

Term Insurance – Form of Insurance that usually last for a certain period of time. (i.e. 30 year term) After term is over you have to replace ice. No cash value usually in the policy. Main types: Level Face-where the face or insurance amount is the same throughout the period. Reducing Term-Usually coincides with mortgage or other personal debt. The policy face or insurance amount decreases over time, often based on debt obligations. Whole Life -Type of insurance that you pay for your entire life. Level premiums and usually can borrow from cash value. An insurance that gives you the ability to have more insurance through the build-up of paid-up additions.Universal Life – It is life insurance that is a Combination of Whole Life and Term. Can build cash value, but is usually not good for anything if it is allowed to lapse. Usually cheaper than whole life but can last a lifetime if funded properly and sold correctly.

Variable Universal Life – A policy that is made of term and separate accounts (not mutual funds) and has a designated face amount. Policies have either a level face or an increasing face. The premise of the policy is to hope that the separate accounts in the policy outperform the returns in the other types of policies mentioned above. The cash value is based on the market-based returns of the separate accounts in the policy minus any expenses of the policy. The prospectus as well as a quarterly statement will reveal the returns of the separate account.