Life Insurance Policies for Children: Are They Necessary?

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When it comes to the necessity of life insurance policies for children, financial experts are generally in a twist of disagreement. Generally, they all agree that there isn’t much use for them, but the disagreement comes from deciphering if there is ever a time where it might be a good idea. You can click here to visit HBF & investigate their life insurance policies.

Those in Favor of Child Life Insurance

For those who champion child life insurance, the ideology is that childhood illnesses render it useful. If a child is born ill, or with a handicap, that they will carry throughout their life, or may die from early on, a life insurance policy taken out on that child has its uses.

  • Long-Term Uses: As the child gets older, and acquires a significant amount of medical history, the rates that either they will pay as an adult, or that their parents will pay, will only get more and more expensive. However, while the child is young and in early stages of illness, there are whole term policies available with an age cutoff that could be acquired affordably.
  • Short-Term Uses: If the child is not expected to survive their affliction, a family might choose to take out a short $5,000 term policy merely to offset funeral costs, and/or provide financial stability during a time of grief, while the parents may need to take time off from their jobs.

Those Who Oppose Child life Insurance

On the side of opposition are financial experts who not only believe that there are better options available, but who argue that the idea of child life insurance policies is an outright abuse of the system.

  • Better Options: A life insurance policy, specifically a term policy, is not an investment; the only benefits to be had are death benefits. Financial experts argue that a 529 plan is by far a better investment in the future of a child, as you’re not putting money into something that you might never need. Board Chairman for Allianz of North America, Bob MacDonald argues, “If you take and put the same amount of money into a mutual fund or an annuity, you would have ended up with more money in cash than you would have had as a face amount of a policy.”
  • Abuse Argument: Life insurance exists to offset income lost for a family that loses their primary income provider; a child does not provide income for anyone. “I’ve always felt purchasing life insurance on children was an inappropriate waste,” says MacDonald, “it’s much more appropriate to put it into vehicles that will benefit the children while they’re living… you’re paying mortality charges and fees that are simply not necessary for a child.”

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