For most of the population, investing in life insurance is something people do for themselves. However, as a parent, you also have the option of buying life insurance coverage for your child. Parents often wrestle with the idea of buying life insurance for their child because they are unsure of whether or not this is a smart financial decision.
The truth is that investing in life insurance for your child early in their life brings along a wealth of advantages for both the parents and the child. Here is a closer look at a few good reasons why you should invest in life insurance coverage for your child.
1. Life Insurance Covers the Unthinkable
The death of a child is much rarer than the passing of an adult. However, it is something that you should be financially prepared for as a parent. In the event your child passes away, the primary advantage of life insurance is that it will cover the costs of things like funeral arrangements, burial and other expenses that can be hard to manage through such an emotionally trying event.
Many parents avoid picking up life insurance for their child because they don't want to acknowledge that there is a chance of something happening that takes their child's life away. Yet, investing in life insurance does not have to be a morbid thing. It is beneficial for other financial reasons.
2. Life Insurance Grows with Your Child
One of the greatest advantages of child life insurance is that it will follow your child to adulthood. Once your child becomes an adult, usually at the age of 21, they will already have a life insurance policy to start out with. Therefore, they will not have to seek their own coverage at an age when life insurance may be far from important in their mind.
Even though investing in life insurance is often ignored by 20-somethings, your young adult years is actually one of the best times to invest in life insurance. But if you have already provided a starting policy through the young adult's childhood, they will already have the life insurance they need.
Having a life insurance policy that grows with your child can be especially beneficial if they develop an illness or disease that could be deemed a pre-existing condition if they were to try and get coverage later in life. So the earlier you pick up coverage for your child, the better off they will be.
3. Life Insurance Provides a Financial Platform for the Future
If you opt for a whole-life insurance policy for your child, this is actually a smart investment in their financial future because it usually accumulates cash value. After a policy has been carried for a certain number of years, your adult child may be able to:
- Borrow against the policy to buy their first home
- Use some of the money to pay for college
- Accept an early withdrawal in a financial emergency
Term life insurance policies are shorter in term and do not build cash value, so these policies are less preferable when it comes to coverage for your child. However, if you are only concerned with death benefits and early coverage, a term life insurance policy is a good investment just the same.
In conclusion, whether or not you choose to buy life insurance for your child should be determined by your beliefs about the advantages and whether or not they make sense for you and your child. If you would like more information about whole-life or term life insurance for your child, contact American Quality Assurance Group for further guidance and information.