Posted: Wed Oct 01, 2008 4:14 am Post subject: child Life policy
Does my child need another life insurance policy? Or, is it that I am allowed to add him on my own policy? _________________ Register Now to have your Insurance queries solved.
Hi, one may say that purchasing a life insurance on a child is a good move, ie when he/she will come of his/her age he/she may enjoy the benefits of your early investment. That is why parents or grandparents often takes out permanent life plans on kids. But some investment professors may consider child's life plan as a lousy investment. The amount of money the policy will fetch at the end of the tenure may not even worth the time and investment. Hence, you may wish to think of the other possible sources of investments to secure the future of your child, before investing the money in a child life plan.
I'd say that it is more important to secure your life than securing the life of the child. If you remained covered with sufficient amount of death benefits, the child will automatically enjoy the benefits of a secured life.
The purpose of life insurance is to protect the family's wellbeing after the pre-matured death of the breadwinner of the family. I hope you're not aiming at gaining out of your child's death, hence, cover yourself by purchasing sufficient amount of life insurance.
Hi there,
You do have the option to either add your child to your own policy or get a rider that adds his name to your own policy. The death benefits for such riders are generally limited between $5,000-$10,000. But whatever be your choice make sure that you have insured his life. Evan
Hi all,
Some people are truly skeptical about covering the life of their children. But it is truly easy. When you opt for a term life policy for your child, you'd need to pay much smaller amounts as premiums. On the other hand you may choose to cover your child through your group life policy provided by your employer. It is also not that costly I guess! Even when you're confused about the whole thing and can't depend on the various feed backs, make sure that you cover for your child as soon as he attains adulthood. ArindamSenIndies
Hi, I have something to say in this regard. I'd think of life insurance as a replacement for my lost income in the event that a near or dear one passes away. If my son is not a celebrity, I don't see him earning so much that would inflict a financial damage to my family in the event that he passes away.
What matters to me the most is the death of my child- I don't think it would be easier for me to bear the tragedy..I don't think anybody would really care about the smaller expenses associated with the death of a dear relative e.g. funeral costs etc. I guess, its a lot better idea to save money (rather than paying for those useless premiums) in order to use it for the challenges that he might face ahead in his life.
Thanks, Purpleheaded08 _________________ Register Now to have your Insurance queries solved.
But Purpleheaded08, don't you see any other reason for buying life insurance for your child? Don't you think it could be truly difficult for you to insure your child once he achieves a medical condition?
I'm sure, you're aware that there are some medical conditions which could prevent your child's life from getting covered in the future. And to tell you frankly, I've seen that the life insurance premiums for young and healthy adults are never costlier than those meant for the children.
Regards, ArindamSenIndies
There are varying views on life ins for children...I personally have policys on my kids and grandkids and yes it creeps me out...the reasoning behind my purchase was this...God forbid something happened, I don't want to have to worry how I'm going to come up with 10k or better to handle the arrangements...these are small policys I have I think they are all 15 or 20k...The policys we have on the grandbabies are a 300 or so one time payment...this insures them until they are I think 26 at that time they can convert it..the main thing is they are guaranteed to be able to purchase life ins...regardless of any health problem. _________________ Have you been helped by a poster? Do you want to show your appreciation? YOU CAN !! Just simply click on the donate button and send them some coin!
Arindam and Lori are exactly right. People purchase life insurance for two main reaons. To cover expenses should something happen and, more ofthen than the first, provide a vehicle for insurance that is available to the child when they are older should they become uninsurable (or insurance is cost prohibitive).
You are simply helping your child provide for THEIR family when they get older. _________________ Life moves pretty fast. If you don't stop and look around once in a while, you could miss it. - Ferris Bueller
Does my child need another life insurance policy? Or, is it that I am allowed to add him on my own policy?
It would normally depend on your "budget" for life insurance premiums.
If you can afford it, I would suggest purchasing a separate life insurance policy on your child for two reasons:
(1) Insuring a child by a "child rider" usually only provides life insurance coverage for a pre-determined number of years, say to age 18.
(2) In the event of your death, the child rider would also terminate (could possibly be convertible).
Buying life insurance on children is just a responsible thing to do.
The amount of life insurance we can purchase on the lives of our children is usually governed by the amount of life insurance we, the parents, own.
So, if we, as parents, have designed our life insurance programs properly, we can purchase a substantial amount of life insurance on our children, why? Because we can "lock in" an insurance premium that will not change when our kids are adults and have families of their own.
How would you like to own a $100,000 permanent life insurance policy for a premium of $25.
I guess this is not a question of need but want. I agree with Jeorge that it is more important to secure the life of the breadwinner than securing the life of the child.
Once this is taken care of, there is no harm to get a life insurance for the child. Some parents may "want" their children to have insurance at lower rate.
Once the children turn adults and take over the policy ownership, they have the advantage of continuing to pay the same amount of premium. Their premium is usually substantially lower than the premium to be borne by their peer who take up policies at much older age. _________________ I am an insuranc sales coach for almost 2 decades. I have a collection of insurance agents' sales stories. To know more, you can visit http://www.stories-connect.com or http://xoseph.wordpress.com
It soes sound morbid putting life ins. on a child but look around at the world we live in. It just isn't as safe as it use to be. We have our daughter insured for $10,000 just in case. When considering getting insurance my hubby and I thought if anything did happen,God forbid, where would we come up with ten thousand. We had the same thoughts on insuring me so all three of us has the coverage if it is needed.
Posted: Sun Oct 05, 2008 1:21 am Post subject: Here is a chapter from my new book
Life Insurance for kids
Life insurance on children is usually purchased on impulse – kind of like the National Enquirer, a pack of gum, or candy bar at the supermarket check-out counter. Like so many other spontaneous purchases, buying a life insurance policy for your child might seem like a good idea at the time. However, once you sit down and think about it, it doesn't always make sense. As a matter of fact, if you ever want to start a heated argument, ask a room full of financial experts about purchasing life insurance on the kids.
Realistically, unless a child is earning a huge weekly allowance, his family's income isn't going to be greatly reduced if he dies. On the contrary, in the extremely unlikely event that a child suffers an untimely death, it's the family's expenses that will drop substantially – not necessarily their income. Unless the youngster is a child-celebrity, sports icon, or teen genius, some might consider that insuring his life would be a waste of money. Money that would probably be better spent buying additional coverage on mom and dad.
Unfortunately, most people aren't as knowledgeable as they should be when it comes to life insurance. In fact, according to Limra International, a research firm sponsored by the life insurance industry, almost 30 percent of the permanent (whole life and its ilk) policies sold in the U.S. every year insure children under the age of 18.
So why do so many parents buy life insurance policies for their children? I believe that it's mostly due to the fact that new parents are always very receptive to the idea of spending a little extra money to protect their children, and that's what they think they're doing. Agents know this and usually encounter very little (if any) resistance when asking for the sale. The insurance companies know this and love the idea that there is very little chance they will ever have to pay a claim on a child's policy.
Whether or not you should purchase a life insurance policy for little Johnny is definitely not something that should be decided while waiting for the coffee to perk. Even though these policies are typically for very small amounts of coverage and are usually offered as a last-minute add-on to a much larger policy the parent has already decided to buy for himself, the decision to cover a child should not be something “thrown together” at the last minute.
This is a decision that has to be made by responsible parents who have considered every single aspect of the “global plan” they have for their children. First consider that life insurance on a child is very inexpensive. A policy purchased early in life is significantly cheaper than one purchased when grown. It is true that securing coverage early in life will guarantee them some form of coverage for the rest of their lives but, whether or not this is a good idea has to be something you've thought about and is somehow woven into that master plan.
One of the most commonly used sales pitches is that life insurance on kids is a great way to guarantee that little Billy will always have a policy, even if he later develops a disease so serious that he doesn't qualify for coverage. This claim isn't exactly false, just much less impressive than it sounds. According to Limra International, only about 5 percent of all life insurance applicants are ever flatly denied any type of life insurance. Thus, even if your child develops health problems later in life, it's not likely that he'll become totally uninsurable. Although purchasing a life insurance policy on a child in order to guarantee future insurability might not be the worst of all ideas, the money might be much better spent on another part of that well-thought master plan.
Another one of the more famous, maybe even infamous, sales pitches used is that life insurance is a tax-deferred investment that will help pay for little Billy's higher education. When he enters college, it is claimed, you can borrow tax free an amount equal to the policy's cash value, never be required to repay the loan or increase the premium, and the policy will continue to insure little Billy for the rest of his life. As long as he doesn't live much past adolescence, this plan should work just fine.
Back in the mid-90s, I investigated a number of cases in which new mothers were specifically targeted for life insurance policies to be used as college savings funds. Agents, after having either read about the new mothers in the local newspapers or purchasing their names from sort of “service” sold the women life insurance policies that were supposed to provide large amounts of money when their newborns were grown and ready to start college. In one case I remember quite well; a new mother was told that if she were to deposit only $28 per month into a college fund/whole life insurance policy on her 4-month old, the plan would pay just a little more than $30,000 when her son started college in only 18 years.
Now, I realize how ridiculous this sounds and how something like this could have been attributed to some sort of post-partum condition, a simple misunderstanding, a mother whose memory failed due to stress, or any number of other reasons. As a matter of fact, in cases like this, some insurance agents have a saying that professes that “buyers are liars.” After locating 17 additional cases of whatever condition these women supposedly shared, and positively ruling out the “rogue agent” defense, I did a bit of “consulting” for the insurance company. In the end, the insurance company saved a huge amount of money in legal fees, the possible embarrassment of network media exposure, and all the new mothers were remunerated very nicely. I love it when a plan comes together.
I have also investigated cases in which agents somehow got the cash value and paid-up insurance values confused. In these cases, the new mothers would supposedly have the ability to use the accumulation fund/cash value to offset future premiums and could withdraw money from the “paid-up insurance fund” to send their children to college. For the record; the paid-up insurance column often found on permanent life insurance illustrations is not a fund from which money can be taken.
These are only a couple examples of sales pitches that don't work yet have been used rather extensively. For a child's college education, the no interest loans, low interest loans, loans taken against the death benefit, partial withdrawals, partial surrenders, etc., usually don't work and are just used to sell you a policy. The truth is that while life insurance is tax-advantaged, it isn't a good investment when compared to alternatives like 529 or Pre-Paid Tuition plans, Coverdell Education Savings Account (formerly known as Educational IRAs), Uniform Transfers to Minors, The Hope Credit, certain grants, and even some low interest loans. For more information on any of these, contact your financial advisor or the IRS website.
Different types of Variable Life Insurance policies are sometimes compared these funds. Life insurance, however, generally costs more. There is an upfront sales commission that's much higher than the sales charge on load or no-load investment funds. Annual investment management fees and of course, annual charges for insurance on the child's life also affect the total cost. Unlike contributions to some college savings plans, the premiums are not deductible and withdrawals from life policies will reduce the death benefit. If you withdraw more money than the premiums you paid into the policy, you will pay income taxes on the difference and the premiums on a life insurance policy will eat into the gains you could make from the money you are paying.
These expenses leave less money to go into the policy's tax-deferred accumulation fund. As a result, you must usually pay into a good cash value policy for 15 - 20 years before it begins to earn more than a comparable tax-advantaged investment. That generally makes it unsuitable as a college investment plan.
The bottom line: Unless it is part of a well-thought master plan, life insurance is for adults. As a parent, you need a policy that will cover the cost of raising your kids if you die prematurely. You work every day to provide for them, make sure they live well, and have the things they mostly want (and deserve). You work to put shoes on their feet and a roof over their heads. Use life insurance as a tool to make sure they always live well. _________________ Please feel free to go to my website at www.markcolbert.com or, if you have a specific question, you can email me directly. I hope I can answer any questions you might have. If not, I can certainly find an answer right away.
All good points Mark and I agree with you 100% in theory...however not necessarily in practicality...Course I'm an old broad adjuster so I did alot of homework prior to buying policys for the grandkids...each cost me I think 369.00 period...death benefit is I think 15k....and is paid up until they are 26 or 27 years old..at which time they have a year to convert it themselves (at a gauranteed rate and acceptance)..to my way of thinking that would come out to about a buck thirteen a month...it's worth it to not have to worry or face the financial hardship of the arrangements should the worse happen..If all goes the way I hope it does that will be 369 bucks that I threw out the window, and the policy is never collected on..the kids can or can't convert it will be their decision then, Nana will not be (hopefully) worrying about their ability to pay for any needed arrangements, but if so, then their parents can pick up the tab then Lord knows I've thrown money away on stupider things... I just know that these kids parents (right now) would have a hell of a time, and have to charge any arrangements and after losing a child making a big credit card payment on their arrangement for the next several years would add to the devastitation, so if we can (as the grandparents) prevent that....for a small amount of money, it helps me sleep better...Maybe it's because I've seen too many people that have had to bury children and did have to pay that 5-10k in expenses....it just makes a horrible situation all the more horrible. _________________ Have you been helped by a poster? Do you want to show your appreciation? YOU CAN !! Just simply click on the donate button and send them some coin!
Lord knows I've thrown money away on stupider things... 
I just know that these kids parents (right now) would have a hell of a time, and have to charge any arrangements and after losing a child making a big credit card payment on their arrangement for the next several years would add to the devastitation, so if we can (as the grandparents) prevent that....for a small amount of money, it helps me sleep better...Maybe it's because I've seen too many people that have had to bury children and did have to pay that 5-10k in expenses....it just makes a horrible situation all the more horrible.
