Do My Kids Need Life Insurance?

Do My Kids Need Life Insurance?

It’s every parent’s worst fear.

Maybe it comes from a doctor. “I’m sorry, but the diagnosis is terminal.”

Maybe it’s a late-night call from the authorities: “There’s been an accident…” No matter how a parent hears the news, there is nothing more terrifying than contemplating a child’s loss.

No matter how it happens, there is no way to prepare for the emotional devastation or the long-term changes to a family’s internal dynamic.

There is no way to predict how the loss of a sibling will affect the other children.

It’s an entirely helpless feeling, and there is nothing anyone can do to make it easier.

While we can’t help with the emotional trauma that the loss of a child can bring, here at P/L/R Insurance, we can help with the more practical concerns by providing life insurance solutions as part of a family’s comprehensive financial plan.

Across the industry, experts provide conflicting advice about purchasing life insurance for children. Some say it’s not worth the investment; others say it’s a great way to save for the future.

At P/L/R, we explain the options and then let our clients decide.

“When considering life insurance for children, it’s important to understand your choices,” says Bill Lawrence, CIC, and President of P/L/R Insurance. “Life Insurance is generally meant to protect dependents in case the family’s breadwinner dies unexpectedly. Clients usually buy life insurance for children to make sure that they can cover funeral expenses if they lose a child to accident or illness.

“When purchased as a stand-alone product, clients may choose to buy whole life policy for their children. At P/L/R, we choose the best option based on how it fits within the family’s overall financial plan.”

 Whole Life Policies

 Whole Life Insurance provides lifelong coverage and builds cash value.

An insured individual can borrow against the account or surrender the policy for cash. Any amount borrowed must be paid back with interest, or the policy’s death benefit will be reduced. If the policy is surrendered for cash, the insurance coverage ends (Tax implications may arise.  Please speak with your accountant before cashing out a whole life policy).

Whole life premiums remain the same for as long as the insured lives, the death benefit is guaranteed, as is the cash value account’s growth rate.

Benefits of Life Insurance for Children

  • Depending on the amount of coverage, the death benefit can cover:
  • Funeral expenses
  • Family counseling
  • Medical bills
  • Expenses if parents need to take time off from work
  • It guarantees the child’s insurability for life
  • Locks in affordable premiums when the child is young
  • Builds cash value that can be used for expenses later.

“There are definitely benefits to buying separate life insurance policies for children,” Lawrence continues, “but that doesn’t mean it’s the right solution for everyone.

“At P/L/R, we make it a point to get to know our clients and their individual financial goals and unique situations. A holistic approach to a family’s financial plan is always a better idea than simply selling one-off policies and is one of the reasons we’ve been so successful.”

 A Better Option?

As happens so often, the best solution is less obvious. Rather than buying a stand-alone policy for each child in the family, Lawrence suggests considering a “child rider” to your own term life policy. While these may not be available from all life insurance companies, they can be a good, economical choice.

“Such a rider provides a death benefit if one of your children passes away. Generally, a single rider covers all the children in a family, and the rider is affordable,” he says. “Broadly speaking, estimate a premium of about $5 per year for every $1000 in coverage that you want to buy.”

Of course, it’s essential to make sure loved ones are financially taken care of if something happens to their breadwinner. It’s also important to make sure that the rest of the family is financially taken care of if something happens to one of the children.

The last thing a grieving family needs to worry about is money.

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