I am running into problem. As I try to get life insurance for my 3 year old, Agents keep trying to sell ME insurance first. they say in NYS the state law requires me to have 4 times the insurance my child has. Is this true? If so what is the thinking behind this law? Is this true for all states? What about Maine? I also have a house in Maine. Maybe I should just buy there. Thoughts?
Do I Need To Have Life Insurance Before My Child Does?
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The general rule of life insurance is that it is for replacement of income in the event of someone passing away.
Some insurance companies may choose not to write insurance on kids of parents of themselves that do not have life insurance.
So here are a couple of suggestions you might want to look at.
1.) Are you covered by a group policy at work? If so, will proof of that coverage work for the agent you are attempting to purchase your child's insurance from? Or, can you/have you added the child to your work policy? Not the best option if you were to leave work, but coverage nonetheless.
2.) Knowing that most companies are going to want to sell you a policy first, perhaps you look at securing a term policy for yourself - one that will not break your budget, but satisfy the requirements needed to be able to purchase the policy for your child. If you look at an ROP (Return of Premium) term policy, you might even be able to structure it in a way that helps you out with permanent coverage as well. Either way, a term policy will be a short term, less expensive way to cover the both of you.
3.) You might look at getting a policy for yourself, and adding your child on a rider (a clause added to the contract that provides additional benefits) to insure them as well for a period of time. That way you provide protection for your child, and provide coverage for them as well.
4.) You could take a few moments and look at your State's Department of Insurance website, and see what exactly the minimums/requirements are (good luck with that, maybe the coffee hadn't kicked in yet, but I found New York's fairly unhelpful). Then work between them.
I would look for an independent agent, and run your needs by them. I would be very open about your desire to seek a second opinion if the agent cannot come up with a viable solution for you. I promise you there is one. Thank you for asking your question, and for looking into providing for your child in a responsible and loving way. You rock! Good luck, and don't hesitate to contact me if you need any help.
I certainly don't know the rationale used when setting this requirement, but I do know that many rules are set to reduce insurance fraud. Buying a large policy on a child, when the adult has no need for life insurance, could be a warning sign for money laundering, or in domestic disputes, even endanger the child.
As with all rules, they tend to hamper law abiding and responsible citizens as yourself, just to keep a few bad characters from carrying out their evil deeds. But after 9-11, you do find that life insurance rules have tightened up, and not a lot any of us can do about it.
Some carriers may be able to make an exception, if you can provide a valid, and detailed explanation as to why there is no insurance on yourself.
The exception would be something like a child actor where an economic loss could occur. Unfortunately in the past some people have found their children to be disposable and insurance simply adjusts the rules. So it will depend on what company you seek insurance from, but outside of being uninsurable yourself, a company would expect you to have insurance on yourself.