5 Life Insurance Tips for Children
Navigating the complexities of life insurance for children can be daunting, but armed with strategies from industry professionals, it becomes a manageable feat. This article demystifies the process, offering expert-backed tips that serve as a financial safety net for the future. Discover how to make informed decisions with insights on policy enhancements, cash value growth, and critical illness riders.
- Perceive Life Insurance as Financial Safety Net
- Use Policy Enhancements for Long-Term Investment
- Select Policies That Create Growing Cash Value
- Buy Early to Secure Financial Future
- Choose Policies With Critical Illness Riders
Perceive Life Insurance as Financial Safety Net
As an insurance advisor with over 30 years of experience, I often find that life insurance for children is mostly overlooked, but it holds significant worth. The foremost tip I can offer to families considering it, is to perceive it more as a financial safety net and less of a beneficiary plan. In unfortunate circumstances, it can provide families with necessary financial support for affairs like funeral costs and counseling.
Life insurance policies for children are typically inexpensive and lock in insurability with guaranteed premiums that remain the same, regardless of health changes down the line. However, it’s crucial to consider the long-term commitment factor and viability of the premiums—ensure it fits well within the family budget. My personal experience in this field has consistently shown that a well-thought-out life insurance plan can provide future financial protection and peace of mind.
William Odom
President & CEO, Deerfield Advisors
Use Policy Enhancements for Long-Term Investment
One tip I’d give to families thinking about life insurance for their kids? Look at it as more than just coverage—it’s about setting up a smart, long-term investment that grows with them. And the best way to do that is by using some little-known policy enhancements that can make a huge difference over time.
Here’s how I like to structure it: Start with a 20-pay permanent participating policy. This means you’re only paying for 20 years, but your child gets lifelong coverage and a solid financial foundation. Then, it’s all about choosing the right face value of insurance because that determines how much money you can shelter inside the policy in a tax-friendly way.
A key move? Selecting the Enhanced Dividend Option with Paid-Up Additions (PUAs). This lets your dividends buy extra coverage, which boosts the cash value growth even faster. Plus, you can allocate even more funds into the cash portion, making it a powerful wealth-building tool.
You’ll also want to decide between early or late cash value access. Personally, I always recommend early cash value for kids’ policies since it gives them more flexibility down the road-whether it’s for school, a first home, or whatever life throws their way.
And here’s a smart add-on: the Disability Waiver of Premium on the parent who owns the policy. If something unexpected happens to you, the policy keeps going without skipping a beat—ensuring your child’s future is protected no matter what.
Bottom line? This strategy locks in a strong, tax-efficient investment that not only protects your child but also creates real financial opportunities for their future.
Steffen DeGraaf
Insurance Professional, AEC Benefits
Select Policies That Create Growing Cash Value
Families seeking life insurance for children should select a policy that creates growing cash value. Whole life insurance policies generate a cash value reserve that policyholders can use to borrow funds or withdraw at important life events. When children reach 18 or 20 years old, consistent premium payments help a policy grow to deliver $10,000 to $20,000 cash value based on policy size and premium amounts.
Life insurance coverage for children protects their future insurability no matter what happens to their health or lifestyle. Under this option, the child can buy more insurance without medical tests when they reach adulthood. By buying a $50,000 whole life policy now, your child can get bigger protection later in life even if their health changes.
Michael Benoit
Founder and Insurance Expert, ContractorBond
Buy Early to Secure Financial Future
Buying life insurance at a young age is a way to give your children a financial head start that lasts a lifetime. Most families focus on immediate needs and overlook opportunities to secure their children’s financial future. But there is one big problem with this strategy. What happens if their insurability changes later in life? Or they need financial support for major milestones like college or a first home? By getting a life insurance policy for your children now, you lock in rock-bottom rates and guarantee their future insurability.
For example, a child age 16 will pay an average of $9 per month for a $10,000 policy. That sounds great. Until you realize that a child age 3 will pay an average of $4.5 per month for a $10,000 policy. That is 50% less. Plus, with a whole life insurance policy, you’re building cash value that grows over time, creating a financial safety net they can tap into for college, a down payment, or any major life event. Imagine your children stepping into adulthood with financial security already in place. A small decision today could mean a lifetime of peace of mind and opportunities for them tomorrow.
Alex Schlesinger
CEO & Founder, Active Mutual
Choose Policies With Critical Illness Riders
When buying life insurance for children, choose policies that offer critical illness riders. These riders offer insurance benefits when the child develops a serious disease to help pay for medical costs and manage financial needs during difficult periods. The addition of a critical illness rider to your policy will slightly increase your premium but provide a lump sum payment which typically ranges from $25,000 to $100,000 based on the diagnosed condition. The coverage becomes available before the child turns into an adult to give families crucial support during their time of need.
People should evaluate policies that add educational funding options to their policies. When a parent or guardian dies unexpectedly the policy’s educational fund rider pays for college tuition fees. The policy rider supports educational costs with an extra 10% of the plan’s value each year starting when the child turns 18. This feature makes the policy a better financial planning tool with targeted benefits to help pay for education.
Nate Baber
Partner and Lawyer, InjuredCT
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