Perhaps as a parent, you've been able to cross off the most important financial boxes for your family. You've set up emergency money, purchased life, and disability insurance, and are on schedule to meet your retirement objectives. Is there anything else I might be doing to aid my children, you might wonder?
This is a good time for parents and grandparents to think about getting a policy for their children. It's a sort of life insurance that protects your children or grandkids and is sometimes misunderstood.
For others, the subject of juvenile life insurance conjures up feelings of apprehension and even panic. After all, why would you want to ensure a child is perfectly healthy?
Fortunately, the loss of a child is exceedingly uncommon. While a juvenile life insurance policy will safeguard your child's financial future in a manner that no other financial product can, some forms of coverage may be more appropriate or cost-effective to secure your child's financial future in a way that no other financial product can.
Coverage By Type
1. Permanent life insurance for minors. As long as payments are paid, this sort of coverage is permanent, and it often builds up monetary value over time, similar to permanent life insurance for adults. In most cases, juvenile coverage are issued at the lowest possible rates and with minimal underwriting. They are owned by a parent or grandparent until the kid reaches the age of 18, at which point the now-adult insured (even if he is still regarded as a child by his parents) can take over ownership.
When the insured adult kid becomes the owner, he or she receives the following advantages:
+Guaranteed insurability. Your daughter or son locks in a low rate and continues the coverage without further medical underwriting—and may typically buy extra life insurance up to the limit set by the insurer. This may be the most compelling argument for parents to purchase life insurance for their children. When you have insurance, it's easy to take it for granted. While most youngsters are healthy, a future health issue might make it difficult to safeguard your child. This has an impact on their entire family, who must find different strategies to shield themselves from financial risk. As I like to say, it mitigates unforeseen medical circumstances which are now unknown.
+Cash value. The cash value of the insurance accumulates tax-deferred over time, making it a dependable savings vehicle with certain distinct features. If cash is needed, the policy owner can use low-interest policy loans or outright withdrawals to get it. The policy can also be surrendered for its cash value, without a surrender charge, in most cases.
2. Term life insurance for minors. Juvenile term life insurance is substantially less expensive for parents than juvenile permanent life insurance and can even be purchased with a one-time payment. Term life insurance, on the other hand, has no cash value and only lasts for a set period of time, such as 10, 20, 30 years, or otherwise on a trigger date such as the insured’s 25th birthday. Policyholders pay a fixed premium for the period of the policy, after which the coverage becomes more expensive, typically dramatically so.
A rider (effectively, a coverage option) on a parent's term insurance is usually offered for juvenile term coverage. This rider usually lasts until your child reaches the age of majority. With a single rider, you can typically get coverage for all of your children for the same amount. The death benefit of a policy can also be used to reimburse expenditures in the case of an insured's untimely death.
3. Group life insurance for children. Finally, through their group life insurance coverage, several businesses provide possibilities for juvenile life insurance. While handy, bear in mind that employee benefit plans can change at any time, and group life insurance, in general, might be difficult or impossible to take with you if you quit your job.
Remember that, even if you have a lot on your plate, juvenile life insurance may assist provide a solid foundation of financial security for your children as they grow up in an unpredictable world.