Do Kids Need Life Insurance?

Mike Gann Financial Planning, Retirement Planning

It’s that time of year again. Time to hit the stores for back-to-school deals. If you have kids in school, you probably have a long list of colored pencils, notebooks, markers and other supplies. Perhaps you need to get your kids shoes, a new backpack and even new wardrobe. And you can’t forget the back-to-school haircut.

This is the season when we make sure our kids our prepared for the upcoming school year. However, it’s always a good time to make sure you and your kids are prepared for financial challenges that could arise. Life can be unpredictable. The best way to minimize risk is to prepare for possible emergencies, no matter how small the probability.

Life insurance is one effective protection tool. It may seem unnecessary for children, but there are a few important benefits. Below are some reasons why you may want to consider life insurance protection for your kids:

It provides financial protection for final expenses.

It’s never pleasant to think about death, especially involving a child. The probability of a child passing away is usually fairly slim, especially for children who are relatively healthy. However, the fact remains that children do occasionally pass away. Accidents happen. Illnesses develop. These things are unfortunate realities.

Life insurance provides a tax-free death benefit upon the insured’s passing. You can use that benefit to pay for final expenses, medical bills and any other costs that may arise as a result of the death. While it may be morbid to consider the possibility, life insurance can ultimately minimize the financial fallout related to an already tragic situation.

It’s usually affordable.

Life insurance costs are generally driven by the risk of the insured. The more likely it is that an individual will pass away soon, the higher the cost tends to be. Insurance companies analyze age and health to make this determination.

Children usually fare well in this analysis. They’re young in age, which obviously reduces their likelihood of passing away. If your child is generally healthy, that also works in their favor. Very often, you can purchase life insurance coverage on a child for minimal cost. A financial professional can help you compare policies and premiums.

It locks in coverage for later in life.

When you purchase life insurance, the insured must go through a process called underwriting. This is an analysis of the individual’s health to determine their risk. For older individuals, underwriting can be a complicated process. However, for children, it usually involves a review of medical records and perhaps a simple physical.

One of the benefits of owning life insurance is that you usually only have to go through underwriting one time. As long as you own the policy, you have guaranteed* coverage, which means you can increase your coverage amount at any time without going through underwriting again.

This could be an important benefit for your child later in life. If they develop a health issue that increases their risk, they can still obtain coverage through the policy you bought them as a child. And they can do so without going through underwriting.

It serves as a savings vehicle.

Many permanent life insurance policies have something called a cash value account. When you make a premium payment, a portion of the premium covers the cost of insurance. The remainder is deposited into the cash value account.

The cash value account grows on a tax-deferred basis over time. The method of growth depends on the type of policy. Whole life policies pay annual dividends. Universal policies pay interest. There are even variable universal life policies that allow you to invest in the financial markets.


Ideally, you’ll never have to use the death benefit feature of the policy. When your child grows up and assumes ownership of the policy, they can either continue the coverage or use the accumulated cash value to help them reach their financial goals. The policy can serve as a tax-efficient savings vehicle as they grow up.

Ready to explore life insurance options for your child? Let’s talk about it. Contact us today at Advantage Retirement Services. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.

*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.

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