Is It Ever Worth It To Buy Children's Life Insurance?

You've seen the commercials for children's life insurance. You may have also noticed it as a part of your benefits enrollment at work and wondered if it is worth it to purchase whole or term life polices for your children. There are many points of view regarding the value of life insurance policies for your kids ranging from the opinion that it's never worth it to those who believe that it's indispensable and should be a part of your financial planning.

Neal Frankle, writer of WealthPilgrim.com, believes that you should never buy children's life insurance. Neal has very compelling arguments. He believes that life insurance is meant to either protect your assets against the estate tax for wealthy individuals (whole and universal life) or to protect your income in case you die so your beneficiaries can continue on (term life insurance). Children have neither assets nor income to protect so he believes that you're better off just investing the money into a separate investment.

The other side of the argument is also compelling. Neal , in my opinion, fails to distinguish between "insurance" and "investing". Insurance should never be meant to replace investing and the reasons for buying insurance are completely different than those for investing over the long term. He states that the odds of something happening to your children are very low. He's correct; the odds are low. However, the purpose of insurance is to protect you against low probability / high consequence events. For example, your chances of dying at age 30 are very low, however, tens of thousands of Americans die at age 30 every year. If you have a family that relies on you for support, then you had better have life insurance to protect them from this low probability / high consequence event.

Investing involves putting a small amount of money away periodically in order to build up a large savings. This takes time and also has investment risk in case of a stock market crash. You may not save enough in time before a major, high cost event occurs that hits you unexpectedly. That's where insurance comes in to play. Children's whole life insurance is safer in that they typically have guaranteed rates along with the life insurance benefit.

Children's life insurance - what's the benefit?

Now that we understand the difference between the goals of investing vs. the reasons for having insurance, we have to ask ourselves if buying children's life insurance is worth it. Although nobody likes to ever think about something as terrible as this happening, we have to consider it as part of our financial planning. What types of costs could arise if something were to happen to one of our children:

1. Excessive medical bills (co-pays, deductibles, full costs, etc.). In the case of a traumatic hospital event, these costs can rise dramatically. Even if you have health insurance.
2. Funeral costs. These can range from $6,000 to $10,000 or more.
3. Lost time from work. Many could imagine taking days or weeks off from work for grieving.
4. Counseling costs.

These are some of the unexpected costs associated with the loss of a child. They may be significant. Obviously, your financial condition and net worth plays into account with your decision. If you have little to no significant savings or assets, then a very low cost children's life insurance plan may be worth it. I personally have life insurance plans for my kids through my employer and would buy plans for them if I were self employed. Many of these plans run around $100/ year depending upon the coverage.

Where can I buy or compare children's life insurance?

If you decide that a children's whole life insurance policy is a good idea, then there are several highly rated insurance companies who offer children's life insurance. Gerber Life Insurance Company has several plans ranging in coverage from $10,000 to $150,000 that have a college savings benefit whereby the proceeds can be used once your child is an adult for education or other expenses.

Other companies that offer children's whole life polices are Mutual of Omaha and Globe Life Insurance,

Again, children's life insurance isn't for everyone. However, if you would like to protect yourself from many of the unexpected costs associated with the loss of a child as well as providing a cash benefit for your child once he or she is an adult, then it may be the right choice.

Don't forget to protect your life as well. In fact, this should be a higher priority. If you don't have coverage or you would like to supplement your employers policy, then we suggest that you compare policies and rates from several highly rated insurers. We recommend Insureme who allows you to compare several policies from major highly rated insurers such as Guardian, Met Life, Allstate, AIG, and more. They also have a benefit that many other quote sites don't have in that they also include independent insurance agents quotes as well.

This should not be considered financial advice which can only be given by a qualified financial professional. We suggest you consult with a qualified financial planner and/or insurance professional who is most qualified to consult with you regarding policy decisions. Many factors are involved in your policy premium and approval; some of which may not be mentioned in this article. We are an affiliate of the Bankrate Insurance Network.

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