Term Life Insurance Articles
Appropriate Life Insurance Coverage For Children
2010-01-17
Many insurance companies now offer children's life insurance plans along with their traditional adult term and comprehensive life insurance policies. But are these plans for children really necessary? And if so, how much is the right amount of coverage for a child? Every insurance company will have a different answer to that question, many favoring large sums or comprehensive plans over little, term life insurance coverage. At the end of the day, however, it falls to the parents to determine what, if any, life insurance is right for their child.
Before buying any child life insurance, parents should make sure they themselves are covered by a plan. Life insurance is designed to pay out on the death of the policyholder, and owing a policy for a child whose parents die uninsured will be of little use. Once the parents are taken care of, a term life insurance quote for the child can be looked at. Term life insurance for children is generally recommended over a comprehensive plan, as the premiums will be smaller and there will be options to add more coverage or alter the plan at the end date of the term. Many companies, including Gerber life insurance, offer plans which can start with a very small amount of coverage, even $5000, which will result in a small premium. At a predetermined age, the policy will double in value.
Detractors of children's life insurance argue that since it is far more likely that a parent will pass away than a child, and a child has no wage loss to replace if they die - which is a major function of life insurance, selling life insurance for children simply doesn't make financial sense. Bob MacDonald, chairman of the board for Allianz Life of North America, argues that purchasing a plan for children to guarantee they will have life insurance as an adult is an "inappropriate waste" because "the chance of a child becoming uninsurable as an adult is extremely small". The possibility does exist, however, for parents to use some or all of the money captured in a life insurance plan to fund a child's college education or other goals.
While experts disagree on if children's life insurance is a worthwhile purchase, a small, term-life amount of coverage can provide a safety in the event that something unexpected does happen. Add to that the ability for many of these plans to double upon a maturity date, and it is possible to accrue a fairly substantial amount for a child's future. Regardless of the child's situation, however, parents must always take care to be protected themselves.
