Agent, Rural Mutual Insurance Co., Union Grove, WI
There are many reasons that you would want to get a life insurance policy for a baby. First of all to guarantee insurability for the little one. To get the policy issued at the lowest rate possible for a second. Conceivably you could have a policy that would be completely paid up before age 18 and provide them coverage for the rest of their lives. There are too many reasons to lists. Contact your local agent to find out what coverages are available in your area.
Parents have their reasons for getting Life Insurance on a baby.
Cover basic funeral costs
Providing a "gift" that will grow to be an Asset for future use.
Provide for future insurance needs locking in the lowest possible rates.
Designing a policy that could be "paid-up" in a set amount of time, say 20 years, more or less.
Keep in mind that companies will generally require that you the parent have Life Insurance on yourself first.
Insurance Companies look at this as "who is depending on the baby for support?" Since no one is then you have to justify the need. Companies would like parents to have up to 4x the amount of coverage on the baby although each company is different and the rules might be bent if a good case is made.
Group Benefits Administrator, Davis & Towle Insurance Group, New Hampshire
There are a couple reasons parents would buy life insurance on their baby. For one a true whole life insurance policy accumulates cash value which could be used to help out in life events such as college or a wedding. It also guarantees the insurability of the child. For example, one of my co-workers purchased life insurance on his young son who developed diabetes at age 13. If he had not done so, his son would have a hard time finding a company who would insure him.
Self-employed Employee Benefits Provider, Upland, California
There is nothing that makes me feel more depressed then to see families and kids on the street holding a car wash for a friend or family member that didn't buy some form of life insurance for their children.
Most insurance companies offer "Level Term" riders that may be added to the parents policies that will allow the parent to insure all of his or her current and future children. These riders also guarantee the insurability of the children as they are usually convertable to their own private policy's when they reach either age 21 or 25. sometimes the insurance company will allow the child to change his or her policy's face amount up to 5 times the amount of the original rider without evidence of insurability. The best thing about these riders is the price, whether you have one child or 20 children you can insure them all for one low price under this rider.
If you are an insurance agent please do not forget to offer this rider to the parents that you are insuring.
Specialist, LTCi, DI, Annuities, Life, Designs In Life, LLC, Utah
This question has several answers. From a financial planning perspective, the answer is that you wouldn't. The adverse financial impact of the death of a child is relatively small. While a terrible tragedy and an absolutely awful thing to go through, technically no one financially depends on them for support. So, one of the basic tenets of life insurance - to provide lost income due to premature death of a family bread-winner - buying life insurance on a child does not make sense. While children might not need life insurance, here are some reasons why one might want to buy it on them anyway:
1. Insure the child's insurability - this can be achieved by purchasing a small face amount of permanent life insurance (I would recommend participating whole life) with a guaranteed future purchase option rider. The rider insures that the insured can purchase additional life insurance without the need to medically qualify. If the adult child's health goes south, additional life insurance can be purchased. Drawbacks: a) the option usually runs out at 40 or so years old; b) typically, only the same type of life insurance can be purchased (which can be a lot more expensive at age 30 than at age 3), and c) if you don't exercise the option, you lose it. Oh, and by the way, the insured usually assumes ownership of the policy at 18, at which time, that income-tax-free cash value can be mighty handy for the down payment on that new car. So long, insurance policy, we hardly got to know you.
2. Provide a source of money with tax-favored access privileges - This isn't likely to work (see "new car" above), but if protected by a trust with strict limits on how the cash values may be used and under what conditions it must be paid back, it could allow a responsible adult child to be his/her own bank and/or have at least somewhere to go, independently, to cover an emergency need. The problem is that even a trust can be gotten around and the cash - and the life insurance benefit it supports - is more likely to end up being spent - and lapsed.
3. If one feels that the death of a child could seriously impact them financially, I recommend purchasing a child rider (usually comes in "units", 1 unit = $1000 coverage) on a parent's term or permanent policy. Twenty-five to fifty-units should be plenty to cover final expenses and maybe some medical bills not covered by medical insurance.
Using life insurance to help fund college is not the best use of the money spent over the years. There are now too many other tax-favored savings vehicles that don't include the cost of insurance to depend on a life policy to provide a significant amount of cash over a 16 or 17 year investment horizon. In the event of the death of one child, the insurance money received as a death benefit could go to help provide some start-up college money for another child in the family (#3 would be the least expensive way for that to happen), but that's kind of creepy.
I think #1 is the only prudent reason to buy insurance on a child and then only when there is a family history of childhood or adult onset of some kind of genetic malady like diabetes or cardiac problems. Otherwise, #3 might make you feel better, but it's not likely to be needed.
.JPG){kind=avatar}
Cover basic funeral costs
Providing a "gift" that will grow to be an Asset for future use.
Provide for future insurance needs locking in the lowest possible rates.
Designing a policy that could be "paid-up" in a set amount of time, say 20 years, more or less.
Keep in mind that companies will generally require that you the parent have Life Insurance on yourself first.
Insurance Companies look at this as "who is depending on the baby for support?" Since no one is then you have to justify the need. Companies would like parents to have up to 4x the amount of coverage on the baby although each company is different and the rules might be bent if a good case is made.
Most insurance companies offer "Level Term" riders that may be added to the parents policies that will allow the parent to insure all of his or her current and future children. These riders also guarantee the insurability of the children as they are usually convertable to their own private policy's when they reach either age 21 or 25. sometimes the insurance company will allow the child to change his or her policy's face amount up to 5 times the amount of the original rider without evidence of insurability. The best thing about these riders is the price, whether you have one child or 20 children you can insure them all for one low price under this rider.
If you are an insurance agent please do not forget to offer this rider to the parents that you are insuring.
1. Insure the child's insurability - this can be achieved by purchasing a small face amount of permanent life insurance (I would recommend participating whole life) with a guaranteed future purchase option rider. The rider insures that the insured can purchase additional life insurance without the need to medically qualify. If the adult child's health goes south, additional life insurance can be purchased. Drawbacks: a) the option usually runs out at 40 or so years old; b) typically, only the same type of life insurance can be purchased (which can be a lot more expensive at age 30 than at age 3), and c) if you don't exercise the option, you lose it. Oh, and by the way, the insured usually assumes ownership of the policy at 18, at which time, that income-tax-free cash value can be mighty handy for the down payment on that new car. So long, insurance policy, we hardly got to know you.
2. Provide a source of money with tax-favored access privileges - This isn't likely to work (see "new car" above), but if protected by a trust with strict limits on how the cash values may be used and under what conditions it must be paid back, it could allow a responsible adult child to be his/her own bank and/or have at least somewhere to go, independently, to cover an emergency need. The problem is that even a trust can be gotten around and the cash - and the life insurance benefit it supports - is more likely to end up being spent - and lapsed.
3. If one feels that the death of a child could seriously impact them financially, I recommend purchasing a child rider (usually comes in "units", 1 unit = $1000 coverage) on a parent's term or permanent policy. Twenty-five to fifty-units should be plenty to cover final expenses and maybe some medical bills not covered by medical insurance.
Using life insurance to help fund college is not the best use of the money spent over the years. There are now too many other tax-favored savings vehicles that don't include the cost of insurance to depend on a life policy to provide a significant amount of cash over a 16 or 17 year investment horizon. In the event of the death of one child, the insurance money received as a death benefit could go to help provide some start-up college money for another child in the family (#3 would be the least expensive way for that to happen), but that's kind of creepy.
I think #1 is the only prudent reason to buy insurance on a child and then only when there is a family history of childhood or adult onset of some kind of genetic malady like diabetes or cardiac problems. Otherwise, #3 might make you feel better, but it's not likely to be needed.