If your clients are parents, they may be able to take out a policy on their child/children. If they pass away, this will help your clients take time off to grieve without sacrificing their financial well-being.
Here are a few reasons why buying life insurance for children can make sense and some policies to consider.
- Potentially lower the 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 children 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. A child can receive lifelong coverage at a low rate.
- Protect the family if the child passes away
Losing a child can be devastating emotionally and financially. Insuring a child with a life insurance policy helps protect your clients and their loved ones if that child passes away. They will have the financial resources for the funeral costs and to take time off so that they can grieve and recover.
- Help the child build wealth early
Having permanent life insurance for children 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 the child becomes an adult, they can withdraw or borrow from it at favourable 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
Some life insurance options to consider purchasing when insuring children are:
- 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 chosen. So, these affordable life insurance policies can work well if your clients 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 for parents wanting to help their children 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 your clients can purchase for their own life insurance policy. It pays out a death benefit if their children pass away during the policy term to help them cover funeral expenses and take time off from work to grieve. In this case, your clients are still the insureds on the policy, not their children. If your clients pass away during the policy's term, their loved ones will receive the regular death benefit.
This is an abridged version of an article which appeared on Big News Network