Life insurance for children is usually not included by many health insurance providers. However, it is still an interesting worthwhile consideration, even if you already have children. The insurance requirements of children may be higher than those of adults because children are prone to more expensive health care expenses than their peers. Children also have families which consist of a husband and wife and children from both parents. The family may have other adults who are dependents to the child or dependents of one or more of the child’s other adults. All of these factors add to the complexity of insurance coverage and you need to consider them all when deciding on life insurance for children.
You can get different types of coverage on a child. A term life insurer will give a limited amount of death benefits to the child. This means that the insured child will not have any death benefits until they reach the age of seventy-five years old. If the insured child should die before reaching this age, then their estate will receive only the payment from the insurance company.
A universal life insurance policy allows the insured to build cash value that will increase over time. This cash value is tax deferred, which means that it does not become taxable until it is disbursed. In order to get the full benefit of this feature, the insured has to make regular payments on a monthly basis. These payments are made to the life insurer in addition to any insurance benefits that the insured receives. Each month that the payments are made, the interest rate is also subject to change. Some financial planners recommend that the insured elect to pay premiums annually.
Another option available for a child is the Toddler Savings Rider. Under this rider, up to twenty percent (rounding to the nearest full percent) of any savings the insured may accumulate during his/her lifetime can be invested. The money accumulated through savings and investment may be earmarked for either a fixed or adjustable rate of interest. Once the insured has reached the age of six, most of the accumulated money will be tax-free, but some may still be subjected to tax. The advantage of this rider is that the rider allows for an increasing amount of savings.
One of the most popular riders to current life insurance policies is the Convertible rider. With these policies, the death benefit is converted from a fixed interest rate to an interest rate that is tied to a variable. Once converted, the policyholder retains the premium amount in order to make payments at a later date. Many financial planners recommend that these policies be used as investment vehicles, since they are both low risk and highly flexible. The downside to Convertible policies is that the conversion is a one-time affair, which makes these policies less attractive for families with a history of several losses.
Another option to consider when buying insurance for children is the Children’s Savings Account (CASA). Like a traditional savings account, the advantage of buying life insurance for children with a CSI is the potential for growth of the account. For parents who want to build a nest egg for their children’s education, a children’s savings account allows them to build up a modest sum of cash that can be accessed when necessary. There is no income verification required for a child’s parents to open and manage their own account; however, opening a children’s account requires the permission of both parents.
Some life insurance products are designed for specific instability factors. Standard policies offer coverage for two types of uninsurable risk: accidents and sickness. The type of coverage selected for a given individual depends on his or her life expectancy, his or her family history of serious illness, and his or her economic status. Certain types of policies also provide for specific changes in terms of the death benefit under certain circumstances. These variables are part of the total contract between the insurer and the insured, known as the residual contract.
Many financial advisors recommend that young people purchase variable insurance policies instead of whole life insurance. Variable insurance products allow young people to plan for the worst case scenario that may occur, but they do not have the lifelong commitments that whole life insurance products do. Regardless of the type of insurance product chosen, it is important to consult with an experienced financial advisor to help determine what types of plans are right for your family. You should be able to find an experienced financial advisor by searching online, by speaking with others who have gone through the process, or by attending workshops on child life policies.