Financial protection in case of an untimely death.
The first reason is to provide financial protection for the child in case of an untimely death. While it is a difficult subject to think about, accidents and illnesses can happen to anyone, including children. Having life insurance in place for a child can provide peace of mind knowing that in the event of their death, the death benefit can be used to cover expenses such as funeral costs and outstanding debts.
The Cash on-demand option.
Another reason to consider purchasing life insurance for a child is to start building cash value early on. Many life insurance policies for children offer a savings component, which allows for cash value to accumulate over time. This cash value can be accessed through loans or withdrawals and can be used to help pay for future expenses such as college or a down payment on a house.
GET LYFE Tip: You can purchase whole life insurance for children for “12” or even “15 years”. Let’s say you have a child that’s 5 years old. You can purchase a 15-year whole-life policy. After that 15-year period, your then 23-year-old child would essentially have his/her own bank to draw from.”
Additionally, some parents purchase life insurance for their children as a way to secure a low rate on insurance in the future. Some insurance policies, such as whole life insurance, have a conversion option that allows the policyholder to convert their term life insurance policy into a permanent life insurance policy at a later date, without having to undergo a medical exam. This can be a valuable option for children who develop health issues later in life and may not be able to qualify for a new permanent life insurance policy at a lower rate.
Teaching the importance of financial planning early.
Lastly, purchasing life insurance for a child can also serve as a way to teach them about the importance of financial planning and responsibility. By involving them in the process and encouraging them to take an active role in managing their policy, it can be a valuable learning experience for them.
In summary, purchasing life insurance for a child under 18 can provide financial protection in case of an untimely death, accumulate cash value over time, secure a low rate on insurance in the future, and serve as a way to teach them about financial planning and responsibility. It’s important to work with a financial advisor to determine the right coverage amount and type of policy that best suits your child’s needs.