Should You Buy Child Life Insurance?
It seems that thinking is divided when it comes to child life insurance.
There are those who would argue that since children do not contribute financially to family income there is no reason to pay for child life insurance. But those on the other side of the argument might point out that there are expenses that must be met in the event of illness or accident and subsequent death and therefore it does make sense to insure children. This is the kind of "What if..." thinking that often leads people to at least consider buying life insurance. It would perhaps not be a high priority for the family budget, but if funds are available child life insurance may warrant consideration.
Another argument in favor of child life insurance is its low cost for a healthy child. This can have long term implications if the policy guarantees future insurability. This could mean that it will be easier for them to obtain insurance as an adult no matter what their health or field of employment.
Still another argument in favor of child life insurance is that it can be part of long term financial planning strategy. A permanent type of life insurance provides some future cash value as well as a death benefit. One could view the life insurance policy cash value as a tax-deferred savings option. The other side of this argument is that the same amount of money might be better spent on other investments for the child. Parents may choose this as a way to create an education fund. A policy that has cash value can accumulate a significant amount from early childhood to the time a child finishes high school. When the child reaches that age they can choose to cash in the policy and use it for their school expenses. But even if they decide not to go to post secondary school, they can leave the policy in force or cash it out for other uses. This is an advantage over registered educational funds which must be used only for education. Having examined the pros and cons, parents may decide that this seems like a wise decision but not have the funds available. There are a number of ways that this can be made more affordable. Parents can check to see whether their children can be added under their own insurance policy at a low cost. Many policies will cover any number of eligible children for a single premium. Since grandparents are allowed to purchase child life insurance policies, this could be another option. Once the decision has been made to purchase child life insurance and the source of funds has been arranged, it really is the same as any other life insurance purchase. You need to be clear on what financial goals you are trying to achieve and to ask questions to clarify exactly what the policy covers. For example, is a term or permanent policy the better choice, what will the premiums be and will they remain the same, what is not covered and so on. It's just the same process as if you were looking at any other type of insurance policy. One difference that you do need to be aware of and ask about is what options are available when your child reaches an adult age. Is the policy convertible to another policy without proof of insurability?
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