Should You Buy Life Insurance for Your Children or Grandchildren? The Pros and Cons

Life insurance is an important financial planning tool for adults – but what about children? While buying a life insurance policy for a child or grandchild may seem strange, and possibly even morbid, there are some valid reasons for doing so. Here are some of the pros and cons of buying life insurance for your children or grandchildren.

Pros: Good Rates, Cash Value and Funeral Coverage

The younger and healthier you are, the easier it is to get good life insurance rates. This means that children, who are obviously very young and often very healthy, can get great rates.

However, children won’t stay young and healthy forever. As they grow older, they may also develop health problems that will make it more difficult to secure affordable life insurance in the future. By buying life insurance for your children or grandchildren, you can lock in great rates. This may be especially important if the child has a high risk of developing a health problem, such as a family history of health issues or a genetic predisposition. 

Unlike a term life insurance policy, a permanent life insurance policy will never expire. As long as the insured maintains the policy, it will last the entire insured’s life.

Permanent life insurance policies also build a cash value that the insured can access during their lifetime. This money could be put toward college tuition, a down payment on a house, or any other purpose. There are different types of permanent life insurance policies, including whole and universal.

Finally, if the child dies, the death benefit that life insurance provides can be very important. In North America, funerals typically cost between $7,000 and $10,000. At the same time, grieving parents will likely need to take time off work, and not everyone is given paid time off for this. During this time of need, life insurance can help struggling families. Parents who have life insurance for themselves may be able to purchase life insurance for a child by adding a rider to their policy.

Cons: Low Need and High Expense

Thankfully, the child mortality rate is low. This means that life insurance will rarely pay out on a child. At the same time, children do not have mortgages, bills and dependents to worry about. Because of this, children don’t have much of a need for life insurance to provide for the needs of survivors.

Although permanent life insurance policies are sometimes desired for the cash value that accumulates, other investment tools may offer a better return. Alternatively, A small, low-cost term policy may be more affordable to manage potential funeral costs, but it won’t accumulate cash value that can be used later.

The Decision is Different for Each Family

In the end, buying life insurance for your children or grandchildren may make sense in some situations. There are different types of policies and riders to meet different needs. However, life insurance for a child is not always necessary, and other financial tools may be better suited to your needs.

Interested in learning more? Get a life insurance quote.

Sources
  • https://www.parting.com/blog/funeral-costs-how-much-does-an-average-funeral-cost/

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