Nothing gets financial advisers all worked up into a debate frenzy faster than the topic of taking out a life insurance policy on a child. There are good arguments on both sides of the fence that should be heard if you’re considering purchasing such a policy, but ultimately it’s up to you to decide what is best for your family financially.
Statistically, child life insurance policies are unpopular; for well over a decade the American Council of Life Insurers have been reporting that out of all persons under the age of 18, only 15% have life insurance.
Below, we’ve outlined some of the key points in these debates and have provided a few tidbits from well-respected financial experts to help aid you in your decision, find out more at suncorp's website.
PRO—CHILD LIFE INSURANCE
In the case of childhood illness, or disability, child life insurance policies are looked upon favorably. If a child spends any large amount of their early life battling medical conditions, they’re chances of finding affordable rates when they get older are slim.
However, as a child, there are special branches of insurance offered in a variety of fashions from certain insurers that are affordable as whole term policies, which are life-long. If a child can carry a policy throughout their life, and maintain an affordable rate, or can transfer to a new policy without additional charge, this is an attractive option.
Even financial planners who are wary, and mostly against, child life insurance policies—such as John Sestina, a financial adviser out of Ohio—will admit, “If your child has the potential for health problems, you’ll have to buy a ton—at least, a million dollars.” With that figure in mind, buying while it’s affordable for your child is certainly a viable option.
ANTI—CHILD LIFE INSURANCE
Those who are adamantly against the idea of child life insurance policies hold that position because they want to encourage you to instead make an investment for your child. Instead of putting money into a policy that only provides death benefits—something that your child will never actually benefit from themselves—they advise that you make an investment into a 529 plan. That way, by the time your child becomes an adult, they have a nice nest egg to assist with any financial burden from their condition.
Others who oppose child life insurance policies do so on principle and call it an “abuse” of the life insurance system and what its purpose is; which is to supplement income lost when the main income provider for a family passes away. A child is never the main income provider.
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