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Life Insurance Policies for Kids


Life Insurance Policies for Kids

 

So many times, we come across in our conversation with friends and family whether we should get life insurance for kids. Always we hear different opinions about life insurance for kids.

 

Should we be buying life insurance for Kids?

From financial planning standpoint buying life insurance for kids is not required, the reason is the child does not have the liabilities, does not earn income and does not have any dependents. Sadly, a death of child is infact a discharge of liability, from financial planning standpoint.

If buying life insurance for child is not required then why are people still buying life insurance for their kids? Buying life insurance on your child still makes sense because of two reasons.

1) the cost of insurance is very low.

2) Future insurability, we can lock in premiums when the child health is good for life.

 

What type of life insurance should I get for my child?

As there are so many products and plan types sometimes it is overwhelming to select which one to buy. It always makes sense to choose a limited pay option, in which the policies are paid up in 10, 15, or 20 years.

 

Will the death benefit I buy for my child today be enough when he/she really needs life insurance?

This is important as the purchasing power of money can get deplicted because of inflation. It is important to choose a plan which addresses this issue. A dividend based life insurance might be a good fit.

 

What is dividend-based life insurance policy?

As the name suggests dividend based life insurance policy generates dividends and one portion of dividend goes towards the cash value of the policy while the other portion goes towards buying more life insurance for child. This makes a lot of sense as this policy  keeps up with the inflation.

 

What are the other advantages of dividend-based life insurance policies?

Dividend-based life insurance policies can provide steady returns with no negative returns. Also, dividend-based life insurance policies are immune to capital market volatility.

 

What are disadvantages of dividend based life insurance policies?

The major disadvantage of dividend-based life insurance policy is that it has very little or no cash value in the first few years.

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