Life Insurance On Your Child

I have two children -- a 5 year old son and a baby daughter. Do I have life insurance on them?

The answer is an emphatic NO!

Those companies who try to convince you to buy life insurance for your children are banking on your desire to "have the very best" for your children. They show you pictures of smiling babies, and they convince you that life insurance is the way to "take care of their future". They are also banking on the fact that children are astoundingly hearty creatures who rarely die in this day of modern medicine.

If you really want to have the best for your children and prepare for their future, start an educational savings plan for them. In Canada, you can actually get up to $400 a year in addition to your contributions in grants from the government.

Further, the only reason that you might want life insurance on your child is to cover your child's funeral expenses. Again, you are better off saving money in the case of an emergency (of any kind) rather than buying life insurance for your child. Life insurance will only help you if your child dies. An emergency fund will help if your child is injured, or if you need the money for other family reasons.

Want to give a money gift to your child when they turn 21? You can always decide to gift the money from a savings plan to your child, in much the same way that many parents give their children a paid life insurance policy when they are older.

You'll likely give your child a larger money gift if you save; the amount of money that a child gets out of any "whole life" policy that you purchase is less than you'd get if you take the same amount of money and invest wisely. Why? Because a certain amount of the money that you pay towards any whole life policy is "premiums" that pay for the "insurance" component of the policy and that amount does not become savings.

We are focusing on paying down our mortgage and saving for our children's education. That should put us (and them) in a better position than any life insurance policy on their young lives ever would.


Posted by a friend on September 24,2006 at 4:24 PM
while your thoughts to save for college are excellent, we all can't predict the fate of our children (it's too morbid) but, ask this question to parents of a child that developed "a condition" at age 10, or worse yet, the child died.. ask them if they wish they had life insurance on their children.  We all intend for our children to outlive us, but sometimes life is not that fair.
Posted by on September 13,2006 at 5:01 PM
Now, don't shoot my insurance agent! He's given me much good advice over the years.

Frankly, I know that I've heard this argument before -- preserving your child's insurability -- but it's not a philosophy that I ascribe to. While it is possible that my child develops some kind of condition that could affect his or her future insurability, I have to consider the odds of that. My children are much more likely to develop such a condition after they are already out on their own and working. In fact, I would be happier to help them buy insurance when they are trying to get their lives launched than now. In my opinion, at this point, my odds are still much better that I help them more by saving for their education than by buying insurance for them.
Posted by G on September 12,2006 at 11:13 PM
whoever didn't educate you on the importance of insurance for young children needs to have his license taken!!
Posted by on September 4,2006 at 7:54 AM
An interesting perspective on a good application of life insurance for kids... So, in your opinion there's a second risk that you are ensuring against: that your child has some kind of health condition (either now or later) that might affect their ability to be insured.

So, we aren't just gambling that our children will survive, but also that they will survive healthy.

Having said that, you'd have to make sure to buy the right kind of insurance policy -- one that they could continue with throughout their lives, and that would provide them the right kind of coverage including the best guess at the right amount. It's quite a guess to make when they are little, considering that we can't know what our children's lives will look like or how much (or little) coverage they might need. I know that policies such as this will allow the child to change their coverage later, but they may not be getting the best coverage at the best price.

Again, it's a matter of risk versus benefit. This is quite a personal decision, and depends on how much risk you are willing to handle, and how much you are willing to pay in order to reduce risk as much as possible.
Posted by tom quigley on September 3,2006 at 10:43 PM
You buy life insurance on your children to preserve their insurability.  Since the cost is so low take advantage of the programs available that guarantees them coverage throughout their lives.  You can't predict their health future sometimes they don't die but become uninsurable and get married.

Just a thought
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