SHOULD YOU GET LIFE INSURANCE ON YOUR CHILDREN?

​The thought that your children could pre decease you is something no parent wants to consider. Unfortunately, it is a reality that many parents had to confront in their lives. To prepare for this unexpected tragedy, many parents purchase life insurance on their children. Others look to purchase policies on their children as a good investment by getting them insured at a young age and lock in low rates. Before doing so, there are many factors to consider to ensure you are making a wise decision. 

Getting your adolescent child their own stand alone insurance policy isn't the best use of your money. It is only advisable to do so if your family has a history of debilitating illnesses. If you have concerns about your child developing this sickness, making it difficult for them to obtain life insurance coverage as an adult, then a stand alone policy would make sense.

The purpose of life insurance is income replacement and to serve as a back up to ensure your family's financial plan is carried out if you pass away too soon. Since your children don't have or create any income, an individual stand alone policy on them isn't necessary.

However, if you feel that your child predeceasing would create a financial hardship or difficulty for you to cover his or her funeral and burial expenses, then adding a child term rider to a policy you have on yourself is an easy and affordable option. That rider can have a face value of anywhere between $5,000 and $25,000. The average funeral costs $10,000, so that is a good amount to start with. To give yourself time to grieve the loss, you can include enough funds in the rider to allow you time away from work to heal without concern that your living expenses continue to be paid. 

These child term riders cover your children up until age 18 with most insurance companies, and up until 25 with others. Once they reach the age of maturity for the policy, they can convert that term rider to an individual term or whole life policy for themselves at five times the face value of their original policy.

Going the child term rider route will save you money in the long run and allow you to purchase more coverage on yourself to secure your family's future. This will give you the flexibility to put those savings into some other type of investment vehicle to save money for your child's college education.

Insurance can be complicated, but it doesn't need to be. Connect with a licensed insurance broker at AllCarePlans for a complimentary consultation and needs analysis to get the coverage that suits your needs.