Life Insurance for Kids
Diapers? Check.
Baby food? Check.
Life insurance? Check?
There's no question life insurance provides peace of mind for adults and their dependents, but it's a lot murkier whether it pays to buy a policy for your child.
For some people, insuring their kids makes perfect sense. Main reason smentionned are to help them build cash value at an early age and to protect their insurability should their health change.
About 2.7 million juvenile policies were sold in the U.S. in 2007 according to LIMRA International, an insurance research firm.
As with policies for adults, policies for kids include term life (coverage for a limited time) or whole life. The average annual premium ranges from about $70 to several hundred dollars, depending on the amount and type of the policy.
Consumers tend to select whole life policies, which build cash value over time.
After receiving ownership of the policy, young adults can borrow against it or withdraw from the cash value.
Despite the benefits of future insurability and cash, many people aren't sold on the idea. If a parent wants to build savings for a child or create a college fund, insurance is not the first answer.
An insurance policy is not an investment vehicle. It's an insurance product that has some cash value.
Child life insurance does have some benefits, but it's not a replacement for a long-term investment plan. It's more like the frosting it's not the cake.
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