Do Kids Need Life Insurance?

Unlike kids, adults buy insurance to protect loss of income due to untimely death. In the absence of income generating ability, insuring a child seems to have ethical issue if not defying the fundamental of insurance.

Let’s us explore a number of reason why people buy insurance for their kids. Some reasons may be controversial in nature.

(a) Investment

Some parents buy insurance for their children with investment as primary reason. There are 2 camps with opposing views, one is in support and another one goes against the idea. The former find it is a good idea. The latter finds it is a waste of money, they are of the opinion that money should be invested elsewhere. In their view, insurance charges and expenses have eroded the investment return.

(b) Education

In the past, insurance used to be a consideration when parents plan to set up education fund. Nowadays, as compared with many other tax-advantaged children education schemes such as Pre-Paid Tuition plans, 529 plans and many others, insurance has become less attractive as an instrument for parents to accumulate education fund for their kids.

(c) Burial

Getting kids insurance policies for burial expenses is an unspeakable reason. It is always the last thing a parent would like to have in mind. Many parents are not comfortable with the idea of taking up life policies on their children for such purpose. Even if they do, they normally get small policies that are just adequate to cover last expenses. For parents, it is unthinkable for them to profit by the death of anyone of their kids.

(d) Convenience

Many parents buy life insurance policies for their children probably due to convenience. When parents have decided to get insurance for themselves, they always find it is not a bad idea to include their children in the “family package”. Even though these policies are usually for very small amounts of coverage, the parents may believe that they have been fair to everyone in the family since everyone is covered. Another push factor is the fact that there is no medical requirement for the children in most situations.

(e) Future insurability

A more acceptable reason to get kids life insurance is guaranteed insurability, no matter what are the children’s heath status in future. The kids will always have insurance coverage even if they later develop diseases so serious that they will not be to get any coverage if they apply for a new life insurance policy.

Future insurability is especially important if the family background exhibits less favorable health history. The parents may like to get their children life insurance to protect their children’s future well being and also their children’s dependents. The parents alone may not be able to take over the financial responsibility for the children’s family.

In addition to that, at some point in time, insurance may not be an option but a requirement especially when we borrow loan to purchase properties we need insurance as collateral. Early purchase of insurance helps to make the premium affordable. Imagine our parents bought us life insurance plans when we were kids, when we take over the plans, the premiums we need to pay are very much lower than those are paid by our peers if they take out life plans at much older age. There are huge premium savings for us in the long run.

(f) Creation of property

Many people don’t look at insurance policy as a property like what they look at land, house or car. A person can own $100,000 life coverage by making a premium payment which is only a fraction of value of the policy. Unlike other forms of properties, life insurance is a very secure asset without much personal attention from you like how you manage other types of properties.

By getting the children life insurance policies, the parents help them create assets that may increase in value. Life insurance on the children can also be regarded as gift of love from the parents to the children.

(g) Charity

Life insurance is always meant for those who survive. That’s why it is called life insurance. It is always the saddest moment in life for parents to know their child is no longer around. There is nothing we can do to bring the child back. But the life insurance policy issued on the child life can help many people. The proceeds from the life policy can be donated to charitable organizations in the name of the child to help others in need. The child may die at tender age yet he or she can help many people to have better life.

Essentially life insurance on children is not a need but a want.

The parents, being the family breadwinners, should place priority in their own protection needs and make sure they are adequately covered. After all, they are the financial pillars to the family. Once the heads of the household have sufficient protection, there is no harm to consider life insurance for the children. Future guaranteed insurability is one good reason for children to have life insurance.


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