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Is children's life insurance necessary?

When my husband an dI were purchasing our term life insurance it was recommended that we also pur chase life insurance for our 14 ear-old son. My husband thinks it is ridiculous, but I"m wondering if there is something we're not considering. Any thoughts would be appreciated. THank you.

May 23, 2012 by Gayle from Sioux Falls, SD in  |  Flag
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Hello Gayle,

I'll start off by saying that I do not sell life insurance. However, do believe in life insurance where appropriate, and I have insurance on each of my children.

First off, it is insanely cheap. Once the child is past age one, the insurance rates are very inexpensive. Rarely have I seen someone really have to "make a choice" between funding their retirement or college funding plans and buying life insurance on their kids. We are talking less than the price of a pizza dinner, a phone texting plan, or any number of other things that most people take for granted.

Having been exposed up close and personal to a child's death, I can tell you that the argument that a small term "rider" of $10,000 will adequately cover the expenses the loss of a child incurs is usually false. Few children simply die in their sleep. Generally there are enormous medical bills, significant counselling (which is NOT adequately covered by health insurance), and legal bills. In many cases, the family chooses to move from their home because of the immense pain caused by a child's loss. This scenario creates a domino effect in which the parents are now paying off bills and suffering instead of continuing funding their retirement plans or college accounts for their remaining children. Often, divorce occurs after the loss of a child.

In my opinion, it simply is not fair for one child to lose their college funding - in ADDITION to losing a sibling - because the parents didn't want to spend the $10 or $15 dollars to adequately insure each member of the family.

In financial planning school (the first class of the Certified Financial Planner Course, in fact), one of the first things we are taught is to adqeuately cover your risks - especially the catastrophic ones. The loss of a child is catastrophic on so many levels that protecting against all of its effects is impossible - but insuring against the unnecessary financial burden - IS possible. And prudent, in my opinion.

Also, if you choose a permanent policy, these policies usually offer a feature called "Guaranteed Insurability." This feature guarantees that the child can purchase additional insurance once they are an adult - no matter what their health or occupation is. So, in the event that your child has a health problem - or enters military service - they can still purchase additional insurance at standard rates where they otherwise might be uninsurable, or "rated up."

Simply put - the small price of insurance on children is NOT likely to make much difference if everything turns out as planned - if the children all grow up healthy and strong and go to college and you retire as planned. You won't even miss the mone. But it WILL make a WORLD of difference if things DON'T go as planned.

Just do it.

Jon Castle http://www.WealthGuards.com

Comment   |  Flag   |  May 23, 2012 from Jacksonville, FL

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Hi Gayle, If you have sufficiently funded your retirement, 529 Plan savings for your children AND covered your own insurance needs (life, long-term care) then - and only then - does it make sense to consider life insurance for your son. The only insurance I would recommend is a small permanent policy that builds permanent value over the decades - assuming normal life expectancy for your son. One question to answer yourselves is - what would you do with the proceeds if your child died unexpectedly? If this question gives you pause for thought, perhaps life insurance for your children is not the best way to invest in their future.

Comment   |  Flag   |  May 23, 2012 from Berkeley Heights, NJ

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Hi - the simple answer is "No, children's life insurance is not necessary." However, since we don't know everything about your family situation in this limited forum, it is within the realm of possibilities that life insurance insuring your child makes sense. I will take my cue from your husband's statement that your family situation doesn't require insuring your son.

It is an emotional sales pitch with an emotional response. Life insurance is to replace lost earning power. Children have no current earning power. While the death of a child is a personal tragedy, it is not usually a financial tragedy. One sales talk you may hear goes something like "Well, you never know if Johnny might become uninsurable at some point and then what would he do if he needed insurance?" Ignore such blather. [As a recovering former "Insurance Guy" I've heard them all.] Don't try to solve tomorrow's non-existent problems with money you spend today.

If you are concerned about funds for final expenses in case tragedy strikes, many insurance companies offer a "family rider" or "children's rider" that will insure other family members for a nominal amount e.g., $10,000 for a (usually) small additional cost. Good luck!

Comment   |  Flag   |  May 23, 2012 from Redmond, WA

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