Does my child need another life insurance policy? Or, is it that I am allowed to add him on my own policy?
Total Comments: 32
Posted: Sat Oct 04, 2008 11:35 pm Post Subject:
It soes sound morbid putting life ins. on a child but look around at the world we live in. It just isn't as safe as it use to be. We have our daughter insured for $10,000 just in case. When considering getting insurance my hubby and I thought if anything did happen,God forbid, where would we come up with ten thousand. We had the same thoughts on insuring me so all three of us has the coverage if it is needed.
Posted: Sun Oct 05, 2008 01:21 am Post Subject: Here is a chapter from my new book
Life Insurance for kids
Life insurance on children is usually purchased on impulse – kind of like the National Enquirer, a pack of gum, or candy bar at the supermarket check-out counter. Like so many other spontaneous purchases, buying a life insurance policy for your child might seem like a good idea at the time. However, once you sit down and think about it, it doesn't always make sense. As a matter of fact, if you ever want to start a heated argument, ask a room full of financial experts about purchasing life insurance on the kids.
Realistically, unless a child is earning a huge weekly allowance, his family's income isn't going to be greatly reduced if he dies. On the contrary, in the extremely unlikely event that a child suffers an untimely death, it's the family's expenses that will drop substantially – not necessarily their income. Unless the youngster is a child-celebrity, sports icon, or teen genius, some might consider that insuring his life would be a waste of money. Money that would probably be better spent buying additional coverage on mom and dad.
Unfortunately, most people aren't as knowledgeable as they should be when it comes to life insurance. In fact, according to Limra International, a research firm sponsored by the life insurance industry, almost 30 percent of the permanent (whole life and its ilk) policies sold in the U.S. every year insure children under the age of 18.
So why do so many parents buy life insurance policies for their children? I believe that it's mostly due to the fact that new parents are always very receptive to the idea of spending a little extra money to protect their children, and that's what they think they're doing. Agents know this and usually encounter very little (if any) resistance when asking for the sale. The insurance companies know this and love the idea that there is very little chance they will ever have to pay a claim on a child's policy.
Whether or not you should purchase a life insurance policy for little Johnny is definitely not something that should be decided while waiting for the coffee to perk. Even though these policies are typically for very small amounts of coverage and are usually offered as a last-minute add-on to a much larger policy the parent has already decided to buy for himself, the decision to cover a child should not be something “thrown together” at the last minute.
This is a decision that has to be made by responsible parents who have considered every single aspect of the “global plan” they have for their children. First consider that life insurance on a child is very inexpensive. A policy purchased early in life is significantly cheaper than one purchased when grown. It is true that securing coverage early in life will guarantee them some form of coverage for the rest of their lives but, whether or not this is a good idea has to be something you've thought about and is somehow woven into that master plan.
One of the most commonly used sales pitches is that life insurance on kids is a great way to guarantee that little Billy will always have a policy, even if he later develops a disease so serious that he doesn't qualify for coverage. This claim isn't exactly false, just much less impressive than it sounds. According to Limra International, only about 5 percent of all life insurance applicants are ever flatly denied any type of life insurance. Thus, even if your child develops health problems later in life, it's not likely that he'll become totally uninsurable. Although purchasing a life insurance policy on a child in order to guarantee future insurability might not be the worst of all ideas, the money might be much better spent on another part of that well-thought master plan.
Another one of the more famous, maybe even infamous, sales pitches used is that life insurance is a tax-deferred investment that will help pay for little Billy's higher education. When he enters college, it is claimed, you can borrow tax free an amount equal to the policy's cash value, never be required to repay the loan or increase the premium, and the policy will continue to insure little Billy for the rest of his life. As long as he doesn't live much past adolescence, this plan should work just fine.
Back in the mid-90s, I investigated a number of cases in which new mothers were specifically targeted for life insurance policies to be used as college savings funds. Agents, after having either read about the new mothers in the local newspapers or purchasing their names from sort of “service” sold the women life insurance policies that were supposed to provide large amounts of money when their newborns were grown and ready to start college. In one case I remember quite well; a new mother was told that if she were to deposit only $28 per month into a college fund/whole life insurance policy on her 4-month old, the plan would pay just a little more than $30,000 when her son started college in only 18 years.
Now, I realize how ridiculous this sounds and how something like this could have been attributed to some sort of post-partum condition, a simple misunderstanding, a mother whose memory failed due to stress, or any number of other reasons. As a matter of fact, in cases like this, some insurance agents have a saying that professes that “buyers are liars.” After locating 17 additional cases of whatever condition these women supposedly shared, and positively ruling out the “rogue agent” defense, I did a bit of “consulting” for the insurance company. In the end, the insurance company saved a huge amount of money in legal fees, the possible embarrassment of network media exposure, and all the new mothers were remunerated very nicely. I love it when a plan comes together.
I have also investigated cases in which agents somehow got the cash value and paid-up insurance values confused. In these cases, the new mothers would supposedly have the ability to use the accumulation fund/cash value to offset future premiums and could withdraw money from the “paid-up insurance fund” to send their children to college. For the record; the paid-up insurance column often found on permanent life insurance illustrations is not a fund from which money can be taken.
These are only a couple examples of sales pitches that don't work yet have been used rather extensively. For a child's college education, the no interest loans, low interest loans, loans taken against the death benefit, partial withdrawals, partial surrenders, etc., usually don't work and are just used to sell you a policy. The truth is that while life insurance is tax-advantaged, it isn't a good investment when compared to alternatives like 529 or Pre-Paid Tuition plans, Coverdell Education Savings Account (formerly known as Educational IRAs), Uniform Transfers to Minors, The Hope Credit, certain grants, and even some low interest loans. For more information on any of these, contact your financial advisor or the IRS website.
Different types of Variable Life Insurance policies are sometimes compared these funds. Life insurance, however, generally costs more. There is an upfront sales commission that's much higher than the sales charge on load or no-load investment funds. Annual investment management fees and of course, annual charges for insurance on the child's life also affect the total cost. Unlike contributions to some college savings plans, the premiums are not deductible and withdrawals from life policies will reduce the death benefit. If you withdraw more money than the premiums you paid into the policy, you will pay income taxes on the difference and the premiums on a life insurance policy will eat into the gains you could make from the money you are paying.
These expenses leave less money to go into the policy's tax-deferred accumulation fund. As a result, you must usually pay into a good cash value policy for 15 - 20 years before it begins to earn more than a comparable tax-advantaged investment. That generally makes it unsuitable as a college investment plan.
The bottom line: Unless it is part of a well-thought master plan, life insurance is for adults. As a parent, you need a policy that will cover the cost of raising your kids if you die prematurely. You work every day to provide for them, make sure they live well, and have the things they mostly want (and deserve). You work to put shoes on their feet and a roof over their heads. Use life insurance as a tool to make sure they always live well.
Posted: Sun Oct 05, 2008 09:35 am Post Subject:
All good points Mark and I agree with you 100% in theory...however not necessarily in practicality...Course I'm an old broad adjuster so I did alot of homework prior to buying policys for the grandkids...each cost me I think 369.00 period...death benefit is I think 15k....and is paid up until they are 26 or 27 years old..at which time they have a year to convert it themselves (at a gauranteed rate and acceptance)..to my way of thinking that would come out to about a buck thirteen a month...it's worth it to not have to worry or face the financial hardship of the arrangements should the worse happen..If all goes the way I hope it does that will be 369 bucks that I threw out the window, and the policy is never collected on..the kids can or can't convert it will be their decision then, Nana will not be (hopefully) worrying about their ability to pay for any needed arrangements, but if so, then their parents can pick up the tab then :wink: Lord knows I've thrown money away on stupider things... :roll: I just know that these kids parents (right now) would have a hell of a time, and have to charge any arrangements and after losing a child making a big credit card payment on their arrangement for the next several years would add to the devastitation, so if we can (as the grandparents) prevent that....for a small amount of money, it helps me sleep better...Maybe it's because I've seen too many people that have had to bury children and did have to pay that 5-10k in expenses....it just makes a horrible situation all the more horrible.
Posted: Sun Oct 05, 2008 11:44 pm Post Subject:
Have to agree with you (as always) 100%. Kudos...counldn't have said it better myself.
Posted: Mon Apr 06, 2009 12:47 am Post Subject: Life insurance on kids
If the parent can easily afford the premium, it can make a ton of sense. First of all, I agree that a child doesn't need insurance in the vast majority of cases. I sell kiddie policies because they guarantee that the child will be able to buy $1,000,000 of coverage in the future without any medical questions. Insurability is fragile.
Posted: Mon Apr 06, 2009 01:28 am Post Subject: insurance
I sell kiddie policies because they guarantee that the child will be able to buy $1,000,000 of coverage in the future without any medical questions. Insurability is fragile.
I'm REALLY interested in what you have to say. Can you tell me more? Right now, my son is 16. What do you recommend?
Posted: Mon Apr 06, 2009 01:45 am Post Subject:
I'm REALLY interested in what you have to say. Can you tell me more? Right now, my son is 16. What do you recommend?
I know nothing about you are your situation so I can't recommend anything. I can tell you something that I often recommend. Additional purchase protection riders are often available for 2x the fact amount of the policy up to a certain maximum and can be optioned 8 times. Let me give you an example.
Ex. Parent purchases a $75,000 WL policy on their child with a $125,000 additional purchase protection rider. At the age of 22, the child can purchase $125,000 of coverage. They can do this again at 25, 28,31,34,37, 40, and 43. That is 8 purchases of $125,000 with no medical questions for a total of $1,000,000.
This is only appropriate if the parent can easily handle the premium.
Posted: Mon Apr 06, 2009 01:47 am Post Subject: insurance
Can you tell me the premium for this particular 'senario'?
Posted: Mon Apr 06, 2009 01:56 am Post Subject:
It should be in the neighborhood of $700/year.
Posted: Mon Apr 06, 2009 08:21 am Post Subject: hi
Doing a Child life insurance for your child is certainly a good move.
It depends how much amount you want to keep for your child.
You can add your child with your policy or can take anotherpolicy
Posted: Sat Oct 04, 2008 11:35 pm Post Subject:
It soes sound morbid putting life ins. on a child but look around at the world we live in. It just isn't as safe as it use to be. We have our daughter insured for $10,000 just in case. When considering getting insurance my hubby and I thought if anything did happen,God forbid, where would we come up with ten thousand. We had the same thoughts on insuring me so all three of us has the coverage if it is needed.
Posted: Sun Oct 05, 2008 01:21 am Post Subject: Here is a chapter from my new book
Life Insurance for kids
Life insurance on children is usually purchased on impulse – kind of like the National Enquirer, a pack of gum, or candy bar at the supermarket check-out counter. Like so many other spontaneous purchases, buying a life insurance policy for your child might seem like a good idea at the time. However, once you sit down and think about it, it doesn't always make sense. As a matter of fact, if you ever want to start a heated argument, ask a room full of financial experts about purchasing life insurance on the kids.
Realistically, unless a child is earning a huge weekly allowance, his family's income isn't going to be greatly reduced if he dies. On the contrary, in the extremely unlikely event that a child suffers an untimely death, it's the family's expenses that will drop substantially – not necessarily their income. Unless the youngster is a child-celebrity, sports icon, or teen genius, some might consider that insuring his life would be a waste of money. Money that would probably be better spent buying additional coverage on mom and dad.
Unfortunately, most people aren't as knowledgeable as they should be when it comes to life insurance. In fact, according to Limra International, a research firm sponsored by the life insurance industry, almost 30 percent of the permanent (whole life and its ilk) policies sold in the U.S. every year insure children under the age of 18.
So why do so many parents buy life insurance policies for their children? I believe that it's mostly due to the fact that new parents are always very receptive to the idea of spending a little extra money to protect their children, and that's what they think they're doing. Agents know this and usually encounter very little (if any) resistance when asking for the sale. The insurance companies know this and love the idea that there is very little chance they will ever have to pay a claim on a child's policy.
Whether or not you should purchase a life insurance policy for little Johnny is definitely not something that should be decided while waiting for the coffee to perk. Even though these policies are typically for very small amounts of coverage and are usually offered as a last-minute add-on to a much larger policy the parent has already decided to buy for himself, the decision to cover a child should not be something “thrown together” at the last minute.
This is a decision that has to be made by responsible parents who have considered every single aspect of the “global plan” they have for their children. First consider that life insurance on a child is very inexpensive. A policy purchased early in life is significantly cheaper than one purchased when grown. It is true that securing coverage early in life will guarantee them some form of coverage for the rest of their lives but, whether or not this is a good idea has to be something you've thought about and is somehow woven into that master plan.
One of the most commonly used sales pitches is that life insurance on kids is a great way to guarantee that little Billy will always have a policy, even if he later develops a disease so serious that he doesn't qualify for coverage. This claim isn't exactly false, just much less impressive than it sounds. According to Limra International, only about 5 percent of all life insurance applicants are ever flatly denied any type of life insurance. Thus, even if your child develops health problems later in life, it's not likely that he'll become totally uninsurable. Although purchasing a life insurance policy on a child in order to guarantee future insurability might not be the worst of all ideas, the money might be much better spent on another part of that well-thought master plan.
Another one of the more famous, maybe even infamous, sales pitches used is that life insurance is a tax-deferred investment that will help pay for little Billy's higher education. When he enters college, it is claimed, you can borrow tax free an amount equal to the policy's cash value, never be required to repay the loan or increase the premium, and the policy will continue to insure little Billy for the rest of his life. As long as he doesn't live much past adolescence, this plan should work just fine.
Back in the mid-90s, I investigated a number of cases in which new mothers were specifically targeted for life insurance policies to be used as college savings funds. Agents, after having either read about the new mothers in the local newspapers or purchasing their names from sort of “service” sold the women life insurance policies that were supposed to provide large amounts of money when their newborns were grown and ready to start college. In one case I remember quite well; a new mother was told that if she were to deposit only $28 per month into a college fund/whole life insurance policy on her 4-month old, the plan would pay just a little more than $30,000 when her son started college in only 18 years.
Now, I realize how ridiculous this sounds and how something like this could have been attributed to some sort of post-partum condition, a simple misunderstanding, a mother whose memory failed due to stress, or any number of other reasons. As a matter of fact, in cases like this, some insurance agents have a saying that professes that “buyers are liars.” After locating 17 additional cases of whatever condition these women supposedly shared, and positively ruling out the “rogue agent” defense, I did a bit of “consulting” for the insurance company. In the end, the insurance company saved a huge amount of money in legal fees, the possible embarrassment of network media exposure, and all the new mothers were remunerated very nicely. I love it when a plan comes together.
I have also investigated cases in which agents somehow got the cash value and paid-up insurance values confused. In these cases, the new mothers would supposedly have the ability to use the accumulation fund/cash value to offset future premiums and could withdraw money from the “paid-up insurance fund” to send their children to college. For the record; the paid-up insurance column often found on permanent life insurance illustrations is not a fund from which money can be taken.
These are only a couple examples of sales pitches that don't work yet have been used rather extensively. For a child's college education, the no interest loans, low interest loans, loans taken against the death benefit, partial withdrawals, partial surrenders, etc., usually don't work and are just used to sell you a policy. The truth is that while life insurance is tax-advantaged, it isn't a good investment when compared to alternatives like 529 or Pre-Paid Tuition plans, Coverdell Education Savings Account (formerly known as Educational IRAs), Uniform Transfers to Minors, The Hope Credit, certain grants, and even some low interest loans. For more information on any of these, contact your financial advisor or the IRS website.
Different types of Variable Life Insurance policies are sometimes compared these funds. Life insurance, however, generally costs more. There is an upfront sales commission that's much higher than the sales charge on load or no-load investment funds. Annual investment management fees and of course, annual charges for insurance on the child's life also affect the total cost. Unlike contributions to some college savings plans, the premiums are not deductible and withdrawals from life policies will reduce the death benefit. If you withdraw more money than the premiums you paid into the policy, you will pay income taxes on the difference and the premiums on a life insurance policy will eat into the gains you could make from the money you are paying.
These expenses leave less money to go into the policy's tax-deferred accumulation fund. As a result, you must usually pay into a good cash value policy for 15 - 20 years before it begins to earn more than a comparable tax-advantaged investment. That generally makes it unsuitable as a college investment plan.
The bottom line: Unless it is part of a well-thought master plan, life insurance is for adults. As a parent, you need a policy that will cover the cost of raising your kids if you die prematurely. You work every day to provide for them, make sure they live well, and have the things they mostly want (and deserve). You work to put shoes on their feet and a roof over their heads. Use life insurance as a tool to make sure they always live well.
Posted: Sun Oct 05, 2008 09:35 am Post Subject:
All good points Mark and I agree with you 100% in theory...however not necessarily in practicality...Course I'm an old broad adjuster so I did alot of homework prior to buying policys for the grandkids...each cost me I think 369.00 period...death benefit is I think 15k....and is paid up until they are 26 or 27 years old..at which time they have a year to convert it themselves (at a gauranteed rate and acceptance)..to my way of thinking that would come out to about a buck thirteen a month...it's worth it to not have to worry or face the financial hardship of the arrangements should the worse happen..If all goes the way I hope it does that will be 369 bucks that I threw out the window, and the policy is never collected on..the kids can or can't convert it will be their decision then, Nana will not be (hopefully) worrying about their ability to pay for any needed arrangements, but if so, then their parents can pick up the tab then :wink: Lord knows I've thrown money away on stupider things... :roll: I just know that these kids parents (right now) would have a hell of a time, and have to charge any arrangements and after losing a child making a big credit card payment on their arrangement for the next several years would add to the devastitation, so if we can (as the grandparents) prevent that....for a small amount of money, it helps me sleep better...Maybe it's because I've seen too many people that have had to bury children and did have to pay that 5-10k in expenses....it just makes a horrible situation all the more horrible.
Posted: Sun Oct 05, 2008 11:44 pm Post Subject:
Have to agree with you (as always) 100%. Kudos...counldn't have said it better myself.
Posted: Mon Apr 06, 2009 12:47 am Post Subject: Life insurance on kids
If the parent can easily afford the premium, it can make a ton of sense. First of all, I agree that a child doesn't need insurance in the vast majority of cases. I sell kiddie policies because they guarantee that the child will be able to buy $1,000,000 of coverage in the future without any medical questions. Insurability is fragile.
Posted: Mon Apr 06, 2009 01:28 am Post Subject: insurance
I sell kiddie policies because they guarantee that the child will be able to buy $1,000,000 of coverage in the future without any medical questions. Insurability is fragile.
I'm REALLY interested in what you have to say. Can you tell me more? Right now, my son is 16. What do you recommend?Posted: Mon Apr 06, 2009 01:45 am Post Subject:
I'm REALLY interested in what you have to say. Can you tell me more? Right now, my son is 16. What do you recommend?
I know nothing about you are your situation so I can't recommend anything. I can tell you something that I often recommend. Additional purchase protection riders are often available for 2x the fact amount of the policy up to a certain maximum and can be optioned 8 times. Let me give you an example.
Ex. Parent purchases a $75,000 WL policy on their child with a $125,000 additional purchase protection rider. At the age of 22, the child can purchase $125,000 of coverage. They can do this again at 25, 28,31,34,37, 40, and 43. That is 8 purchases of $125,000 with no medical questions for a total of $1,000,000.
This is only appropriate if the parent can easily handle the premium.
Posted: Mon Apr 06, 2009 01:47 am Post Subject: insurance
Can you tell me the premium for this particular 'senario'?
Posted: Mon Apr 06, 2009 01:56 am Post Subject:
It should be in the neighborhood of $700/year.
Posted: Mon Apr 06, 2009 08:21 am Post Subject: hi
Doing a Child life insurance for your child is certainly a good move.
It depends how much amount you want to keep for your child.
You can add your child with your policy or can take anotherpolicy
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