Life insurance for children is not something parents typically think about.
But according to Sid Halpern, founder and CEO of Halpern & Associates in Independence and Moreland Hills, and Lee Nathans, account executive at Call Insurance Agency in Columbus, a life insurance policy is a worthwhile investment.
“I wouldn’t think of it in terms of an investment that would be purchased to ensure additional financial gain, there are other investment opportunities that might produce a better return,” Nathans said. “But the primary reason for purchasing a child’s life insurance would be that though it does offer some cash build-up, this is more about the parents being able to protect their child and provide assistance should the child develop health issues in the future. It protects the insurability of the child.”
There are some very good reasons to consider insuring a child for his or her benefit, Halpern said.
“The earlier you purchase a policy, the less it costs,” he noted. “No matter what kind of policy you purchase, life insurance costs more as you get older. With a permanent life insurance policy, you can lock in a premium price when you first purchase it. If you get that policy for your child at a young age, that low premium is locked in and will not go up through the course of their life. Lastly, permanent life insurance also accumulates tax-deferred cash value. This can be an enormous financial advantage for your child as they go through life.”
When considering when to purchase these plans, the professionals both said, the earlier, the better.
“If the parent wanted to select a plan that would build value, the sooner, the better,” Nathans said. “They would be available to parents a few weeks after birth. There is a payment strategy called short pay, and depending on the interest rates at the time, there would be enough money built up to pay for college or something. It’s like front-loading it. The other reason is guaranteed insurability through a plan that the parents would purchase. It could also cover any future children that would be born to the parent automatically with just a notice to the insurance.”
The benefits of insuring early reach into the child’s adulthood too.
“Their health or situation may change if they wait until their 20s or 30s to get a policy,” Halpern said. “For example, what if their hobbies and interests grow and evolve to include things like sky diving, mountain climbing or scuba diving? These are things that could affect their insurability. Or, their occupation may change. What if they become a power line worker or something dangerous? That could also affect their ability to get an affordable plan.”
When shopping for plans, parents should consider a few things, starting with the selection of an adviser.
“They have to select an adviser they can have trust in,” Halpern explained. “That is No. 1. Secondary to that, they should select a reputable company to go through. They should only select a company that has a triple-A rating for all four rating services.”
Nathans added, “I always advise clients to look at the financial stability of the insurance carrier. When you’re thinking of a product that is going to have future value, you want to make sure the company is strong enough to pay future claims if necessary.”
No matter the type of plan selected, Halpern reiterated the uniqueness of the gift of insurance.
“Parents are always looking for unique gifts for their children, and they want one that will never wear our opposed to a toy or shoes,” he said. “This is a gift that is guaranteed to grow with them.”