Although it might sound contradictory, there are many good reasons you might need to get whole life insurance for kids, whether you’ve already done your research, and determined you need it, or are just going in for the policy. Structured properly, this can be extremely to your benefit to insure your kids, or children’s children. When you pay attention to their various needs, you can give them the support they need when times are rough. In many cases today, kids are relying on their parents more than ever. There are now five million kids in the United States alone who are living with only their parents. These statistics make it very clear that it is important to make sure you have enough coverage.
In addition to providing security during your retirement, or after a specific time period as long as specified by the policy owner, whole life insurance for kids will also provide financial assistance should your policy holder fall ill during any part of the coverage period. In fact, whole life insurance for kids is actually a great way to ensure that you have the financial resources you’ll need when someone in your family becomes very ill. If a policy owner doesn’t pay out, then you and your loved ones could be left with huge medical bills. And, depending on the type of plan you purchase, these policy loans could end up being substantial.
Another great reason for purchasing a whole life insurance for kids is that you can often get discounts on premiums by attaining good grades in school. Even children with bad grades can obtain some type of discount on premiums. However, you may need to wait until after a certain period has passed, usually around 3 years, in order to get this type of discount. If you’re looking for affordable coverage, however, this may be an option to consider.
You may also want to consider taking out a term policy. Term policies are generally cheaper than whole policies, because they don’t charge a yearly income tax for the benefits. If you purchase a term life insurance policy for your child, however, you must remember that the premium payments will accrue and be due on a tax free basis. This tax-free basis varies from plan to plan, so you’ll need to do some research to find out which plans offer the best deals on the cash value accumulation and interest accrual. If you’re concerned about the possibility of a future taxation on your family’s estate, then this may not be the right option for you.
You may also want to consider the options afforded by whole life insurance policies for your kids. As mentioned earlier, many policies offer cash value accumulation bonuses. This means that the value of your coverage can increase over time. However, you won’t get to keep the growth money if you surrender your policy before it expires or if the beneficiary dies before you redeem the accumulated cash value. However, the peace of mind this can provide is well worth the peace of mind obtained from knowing that should your loved one pass away before you are able to access the funds, your entire family will be covered.
Another option that you may want to consider when considering whole life insurance for kids is an infinite banking policy. An infinite banking policy is essentially a combination of a standard savings and loan account as well as a savings account tied into a life insurance plan. Unlike a standard savings and loan policy, however, you can choose the size of your deposit, allowing you to choose either to withdraw your funds early, use the interest accrued during the years you’ve paid into the account, or freeze your account and only withdraw what you need in the years leading up to the payout.
Finally, as parents we have a responsibility to our children. Our obligations begin at birth and carry on through graduation, service in the military, marriage, and beyond. As we’ve all been taught, securing the financial future of our children is the number one priority in our lives, second only to our spouse’s income. Many of us sacrifice our financial status, to provide the material essentials for their education, their home, their food, and their shelter. One of the most important things a policy owner can do is provide a tax-free lump sum payment upon death for the beneficiary, who then takes possession of the funds and uses them according to the directives defined by the policy.
When comparing whole life insurance companies make sure you take note of how easy they make it to add your child as an existing customer. The more accessible a company is the better. Also, inquire about the amount of interest that may be available to you should you choose to borrow against the policy in the years to come. Lastly, review the terms and conditions listed in the policy and make sure you understand them before signing.