According to LIMRA's 2022 Life Insurance Barometer, 68% of life insurance policyholders felt they'd be financially secure if the primary wage earner passed away. However, life insurance isn't just for insuring yourself. If you're a parent, you may be able to take out a policy on your child. If they pass away, this will help you take time off to grieve without sacrificing your financial well-being. This article will dive into a few reasons why buying life insurance for your children can make sense and cover a few policies to consider:
Reasons to buy life insurance for children.
Here are several reasons why it may make sense for you to get life insurance quotes for your children:
1. Potentially lower your child's life insurance rates when they're an adult
The younger a policyholder is when they get a policy, the lower their rates will be. So, getting a life insurance policy for your child can help them lock in the lowest possible rates to save money on coverage. This can be especially helpful for permanent life insurance, which costs more than term life insurance but lasts for life. Your child can receive lifelong coverage at a low rate.
2. Protect your family if the child passes away
Losing a child can be devastating emotionally and financially. Insuring your child with a life insurance policy helps protect yourself and your loved ones if that child passes away. You will have the financial resources for the funeral costs and to take time off so that you can grieve and recover.
3. Help your child build wealth early
Permanent life insurance for your child can help them build wealth early through the cash value growth component. Part of each premium goes into the cash value. It grows tax-deferred at a specific rate, depending on the policy type.
Once that cash value grows enough and your child becomes an adult, they can withdraw or borrow from it at favorable rates. If they ever surrender their policy, they'll receive the full cash value minus surrender charges.
Life insurance options for parents to insure their children.
Here are some life insurance options to consider purchasing if you want to insure your children:
Term life insurance
Term life insurance can offer less expensive premiums than permanent life insurance for the same level of coverage. However, it can expire in 10 to 30 years, depending on the policy term you choose. So, these affordable life insurance policies can work well if you want to minimize costs and don't have complex financial plans.
Whole life insurance
Whole life insurance costs more than term life insurance but lasts for life. It also comes with cash value that grows at a fixed, guaranteed interest rate. As a result, whole life insurance can be a good choice if you want to help your child build wealth and help them save on lifelong coverage.
Child life insurance rider
A child life insurance rider is a type of add-on coverage you can purchase for your own life insurance policy. It pays out a death benefit if your child passes away during the policy term to help you cover funeral expenses and take time off from work to grieve. In this case, you are still the insured on the policy, not your child. If you pass away during the policy's term, your loved ones will receive the regular death benefit.
Protect your child with life insurance.
Life insurance for children can help your child lock in the lowest possible rates and build wealth early through cash value. All the while, your family is protected if the worst happens, and your child passes away.
If you already have a policy, you could add a child life insurance rider to cover your child without needing to get a new policy. If you want a full policy for your child, term life insurance can work if you want to save money and aren't looking for lifelong coverage. Meanwhile, whole life insurance could be the right choice if you want them to get low rates on lifelong coverage and wealth-building potential. Whichever option you choose, shop for multiple quotes to compare and pick the lowest rates on the coverage you need.