Why Life insurance is important for children

Why Life insurance is important for children

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What Is Life Insurance for a Child?

Like a life insurance policy for an adult, a life insurance for a child is a contract with an insurance company. Premiums are paid (monthly or annually) in return for the commitment that the insurance company will pay a death benefit if the child dies.

With an insurance policy for an adult, the policyholder typically is the insured person—who is covered by the insurance policy. With a policy for a child, the child is insured, but a parent, or legal guardian is the policyholder. The policyholder also can be the beneficiary who get a payout if the insured child dies.

You cannot purchase a term insurance life policy for a child, which would provide coverage only for a certain duration. However, if you purchase a term life insurance policy for yourself, you might be able to add a rider to cover all children until they reach a particular age, at which time the coverage likely can be changed to permanent policies for children at an additional cost.

Why Life Insurance for Children?

Insuring a child at a young age guarantees that he or she is insured now and has the ability to get insurance in the future.

As parents, we would do anything for our loved ones, but what if the medical expenses were already taken care of and we could concentrate on being our child’s soft place to fall?

The following are the reasons for insuring a child can make sense:

1. Allows parents and grandparents to leave a financial legacy to their children and grandchildren.

2. Affordable premiums guaranteed for life time.

3. Insurance policy can be had limited pay periods.

4. Any dividends, under a participating whole life policy can grow tax sheltered within the insurance policy.

5. Dividends can be used to enhance coverage and cash value and accumulating cash value will allow for future borrowing needs.

Children’s Term Insurance Rider

A children’s term insurance rider is an additional feature available in most life insurance policies that provides term insurance protection for the children of the insured. A term life insurance rider for your child can be added to your own whole term or term life insurance policy for an additional monthly premium cost.
Term riders are the least expensive way to get coverage for your child. The coverage can be added when either parent buys a policy before the child has reached the age of 17. This coverage lasts until the child reaches a certain age, usually 25 years, or up to the time, the parent turns 65 years, whichever occurs first. The coverage is generally available in increments of $5,000 up to $25,000 or $30,000 depending on the insurance company.
The same rider can cover all children, including any child you may have in the future. The price for the coverage is not dependent on the number of children covered under the policy.
A child’s term insurance rider can be changed into permanent insurance between a dependent child’s ages of 21 and 25. If the original policyholder dies before the dependent child reaches the above-mentioned ages, most policies will continue until these ages with similar convertibility options.