Bring a child into this world and before long you will receive unsolicited pieces of mail suggesting that you insure your child’s life. A life insurance quote for kids – is it ghoulish or a good idea?
The sales pitch for such a life insurance rate quote almost always suggests that the rates are extremely low and that the coverage is guaranteed for the child’s entire life, even if they will later on develop some kind of health condition that might normally preclude them from such coverage. As you might imagine, this kind of life insurance quote of course pertains to whole life coverage and even parents who view the policies as ghoulish will give them a second look since whole life coverage has the build up of a cash value attached to it.
This cash value may later on be of great interest to a child who needs funds to get into college, buy that first car, get married, or simply put down a bit of extra money on a piece of real estate. The ability to borrow against the policy when the child is grown gives parents the understanding that they are actually investing in their child’s future wellbeing, thus making this an attractive savings account which also provides a life insurance benefit their child may not be able to purchase later on, should she or he come down with a disease.
Yet before you request a life insurance quote for a kid’s policy, hold your horses! These policies are very low with respect to the cash value they build up; usually they run $5,000 to $10,000 which – if you are honest – is not a lot of money today, much less in about 15 to 20 years from now, when your child is grown up. Since the policies do not adjust for inflation, this kind of money may provide precious little in that period of time.
At the same time, remember that smart investing – you can purchase the services of a financial planner for a pittance these days – may permit you to set up a much larger nest egg for your child with a lot less money than it costs to fund this policy. In addition to the foregoing, the notion that this kind of life insurance policy permits your child to purchase her or his own policy later on, even if the child may come to suffer from a disease, is somewhat misleading. Consider that many life insurance companies today will insure consumers suffering from any kind of condition, including diabetes, heart disease and even strokes! The times when you had to be in perfect health to buy life insurance are long gone.
This of course must lead you to the conclusion that a life insurance quote for kids is indeed ghoulish rather than a good idea and if you are wanting to invest some money for your kid’s education or future wellbeing, discuss an education IRA or trust with your financial adviser who can ensure that your child will have funds that actually mean something in 15 to 20 years rather than being a small leg up even by today’s fiscal standards.
