Should You Get Life Insurance for Your Child?

A question that many new parents find themselves asking and often pose to their insurance agent or broker is whether or not they should get life insurance for their child. You may perhaps have seen a Gerber Life Insurance television commercial, or something similar from another insurance provider, that touts their child insurance program as a way to:

• Lock in a lifetime of low premiums for your child at an early age.
• Guarantee your child's future insurability, or their ability to buy more insurance at a later age, regardless of their health.
• Since most of the child policies sold are of the whole life type, which have a built-in cash accumulation component, these policies are sold as a savings vehicle.
• Provide money for funeral expenses, counseling, medical expenses or help with money lost from taking time off work.

Before You Buy Your Kids Life Insurance

The main purpose for life insurance is to replace ongoing income lost through a family provider's death and to pay off outstanding debts left behind. Experts recommend that both parents have life insurance while their children are growing up, even if one of the parents is a stay-at-home mom or dad. This is because the cost of hiring someone to perform the duties of a stay-at-home parent while the income-earning parent continues at his or her job is significant.

Kids, of course, don't typically have an income that would need to be replaced and, in fact, when a child is no longer in the family household, costs generally decrease. They also don't have debts that need to be paid off. As far as having money for funeral expenses, there are other ways of saving for these types of contingencies that make more sense. Paying in regularly to a household emergency fund will provide a more balanced method for creating a financial safety net and that fund can be used for any type of emergency that comes up.

Locking in Insurability

Children developing medical problems early in life could have difficulty qualifying later for life insurance. Getting coverage before this happens guarantees that they have some coverage now and can buy more later, regardless of health problems.

This alone may be reason enough to consider insuring your young children now, although “guaranteed insurability” is limited to a multiple of the amount of the original policy, and may be much less than what's needed for adequate protection.