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Kids & Money: Should You Get Life Insurance for Your Child?

One of the big questions that you have to ask yourself as a parent is whether or not you should get life insurance [3] for your child. Programs like the Gerber Grow-Up Plan let you buy life insurance for your children for a small price. Then, when your child is older, he or she can keep the life insurance policy, ensuring that he or she is insured, or the policy can be cashed in to help pay for college.

Another consideration is that it is possible to purchase “regular” life insurance for your child. Some people choose to purchase whole life policies for their children. And, of course, many parents have riders attached to their own policies. These small insurance amounts are meant to help cover burial costs. Here are some things to consider as you determine whether or not to buy life insurance for your children:

Future Health Problems

Some health problems can prevent an adult from getting the life insurance coverage [4] he or she needs at an affordable rate. The purchase of a whole life policy while your child is long can mean that he or she is already set for life insurance, and doesn’t need to worry about future health problem derailing efforts to receive affordable life insurance.

However, if you don’t have a family history of health issues like diabetes and more, it might not be worth it to insure your child young. Chances are that he or she will be able to obtain the life insurance he or she needs.

College Funding Needs

It used to be that getting life insurance for children was one way to “save” money for college. However, this is not the case so much anymore, since there are 529 plans [5] and Coverdell ESAs to help parents save up for eventual college costs. Besides, the cash value in many of these insurance policies designed as college savings vehicles is usually so insignificant that it doesn’t make that much of a difference. You have to buy a large amount of coverage if you want to be able to effectively cash in the policy.

Instead, it might be a better idea to just find other college savings opportunities, rather than relying on an insurance policy to help pay for your child’s college.

Does Your Child Make Money?

For the most part, life insurance is actually supposed to protect families in the even that a wage earner passes on. In most families, children don’t qualify as wage earners. However, there are situations where the child does earn a living. This might be done through modeling, performing, or by some other means. In that case, life insurance for your child is a must. If your child is bringing in money, he or she should be insured so that your family is protected from a loss of income.

Riders on Your Insurance

Many parents simply find it easiest, and most cost-efficient, to add a rider to their own coverage. These riders, usually with between $1,000 and $5,000 worth of coverage, are designed to pay out if a child dies. This is money that can cover funeral expenses. That way, if your child unexpectedly passes on, you have the money available to cover some of the costs.

Whether or not you decide to insure your child is up to you. However, don’t be swayed by insurance salesmen that tell you that you will get life insurance for your child because you love them. Life insurance isn’t for the person covered, it’s for the people left behind. So, if you love your child, and care for his or her future, you’ll make sure your own coverage is adequate for the future.

(Photo: sophie.z.j [6])