Reasons Why Your Kids Should Have Life Insurance
Erin Liggins, MBA
General Agent at Globe Life American Income Division: Olusegun Organization
Though we talk a lot about making sure that parents secure life insurance to protect themselves, their income and their families in the case of an untimely death, the discussion of policies for children is often spoken of as a secondary, something that can be done later.
I’ll briefly explain a few reasons why securing life insurance for your children is not just a nice idea. It’s the best idea!
The rates are exceptionally low for kids.
The cost of life insurance depends on the age of the person applying to be covered. Children receive the lowest, most affordable rates for coverage. $25,000 of insurance for minors averages between $5 and about $25 dollars. For context, to acquire $25,000 at retirement age could be close to $100 per month.
Why not lock in the lower rate so that when that tiny bill is drafted from your bank account, you’ll be more than happy to make such a small sacrifice to give your babies an economic advantage for their future?
Guaranteed insurability is indeed a privilege.
Access to life insurance is based on gender, age and health. From the point of view of the insurance company, covering large numbers of people with major health issues could bankrupt the organization. It’s just too risky.?
However, children receive preferential treatment in the form of something called guaranteed insurability. The child will one day become an adult, get married and/ or have children of their own, so of course they’ll need to increase their coverage.?
Guaranteed insurability means that if they are diagnosed with a terminal illness in their adulthood, they are guaranteed the ability to increase the amount of life insurance they have. That is a very, big deal. Essentially, they'll be able to ensure that their coverage is enough to cover their lifestyle.
Life insurance teaches children fiscal responsibility.
Yes, many parents continue to pay for their children’s policies throughout their adulthood. Others use it as a mechanism to teach their kids key financial lessons. Once the child grows up, finishes school or gets a job of their own, some parents encourage their children to take over the policy payments.
When a young adult is responsible for their own policy, they learn about being consistent with paying their bills, the importance of life insurance in their lives, and how compound interest actually works. Which brings us to the next point.
Life insurance becomes your child’s very own financial institution.
When premium payments on policies are made each month, each payment accrues between 4 and 5% interest in what’s called loan value (or cash value). Your child is able to borrow against that interest in case they have financial need for some cash.
This cash value will come in handy if there are some education expenses due, or even as down payment on a house, car or small business. Its how Walt Disney built his theme park empire worth billions. If it’s good enough for Disney, its good enough for your children.
First, that interest accrual significantly trumps the interest rates of savings accounts with banks. As well, policy owners won’t have to go through nearly as much time, hassle and red tape in order to take out a loan.?
A policy can contribute nest egg your child needs for their retirement
Sometimes, I think about what my son would ever do if something ever happened to me. How would my precious little pooky bear live (he’s a 16 year old, 6’5” athlete and hates those baby names lol)? The last thing we want to imagine is our kids struggling in their golden years of life.?
Life insurance is a great additional safeguard for those times. Whole life policies include what’s called reduced paid up values. Look at it like this: If your child needs some cash to survive on after retirement, they can take a slightly reduced face amount as a payout. This gives them a bit of a cushion that can add to any retirement monies that they may or may not have.
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If your child does not have life insurance, you should private message me now so that we can find a time to chat. Let's set your child up, and I'll even throw in some freebies that you won't regret.
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