by mega » Wed Feb 06, 2008 02:00 pm
I was reading an article this morning about life insurance and kids and was wondering what the community take on this is. The article is of the opinion that child life insurance is not a good investment on kids but I have heard others say it was a good idea. Is it a waste of money. Would the money you spend be better invested elsewhere?
Here is a quote from the author of this article on yahoo:
Here is a quote from the author of this article on yahoo:
Question: I received an offer in the mail to buy a life insurance policy for my 18-month old daughter for a small monthly premium. As I understand it, the policy would not only build cash value, but double the amount of insurance coverage when my daughter turns 21. Do you think this is a good plan to build for my daughter's financial future or is there a better way?
-- R.K.
Answer: Let me put it this way. I think almost anything you would do with your money, outside of buying lottery tickets or playing the ponies, would be better than sinking it into a life insurance policy for your daughter.
Posted: Sat Feb 09, 2008 08:01 pm Post Subject:
Hello everyone,
Thank you very much for the kind words, Maze. When I was asked if 44 felt any different that 43, I had to say that it didn't necessarily feel any different than 33. Just a bit more grey and a few more pounds.
You know, I've gave this chapter quite a bit of thought before putting it to paper and feel that [we] those of us with a slightly greater knowledge of actuarial probability than others, are far less likely to fall into the class of insurance consumers that this article was written for. In other words, because you and Lori have a greater knowledge of insurance than the average consumer, I am not surprised at all that you disagree with me.
Do me a favor by taking a step back and looking at this from the standpoint of the majority. If 100,000 people read this article, how many will fall into the category of those who truly understand the process of purchasing insurance for children?
Unfortunately, some of know families who've had to file a death claim on a child, and for those people I guess it was fortunate that they had a policy in place to offset the cost of the burial. Statistically speaking though,
these cases are extremely rare when compared to the number of children's policies that lapse without ever paying a claim.
Lori, when you said
just the mere thought of losing a child...and then to buy something that will pay you if your child dies! oh my gosh!
you literally spelled out the frame of mind some insurance companies (Gerber, for instance) have driven into the American insurance consumer's mind. They've literally attacked us from our weakest point - the healthy, safety, and welfare of our children.
I never bought life insurance on any of my children. If any of them had perished, I could not imagine how much this would have devastated me. I would have, however, taken $1500 - $2000 from somewhere, given them the best funeral I could have and done my best to keep the lives of their mother and my other children in some sort of order until the wounds began to heal. That's both my duty and responsibility as a father.
And that's my opinion.
Posted: Sat Feb 09, 2008 08:18 pm Post Subject:
because you and Lori have a greater knowledge of insurance than the average consumer, I am not surprised at all that you disagree with me.
Only thing I disagreed about at all Mark was that I felt the purchase of child life insurance policies is rarely impulsive, or as nonchanlant as you put forth...I know for us (at the time) and many young parents even an extra twenty bucks a month was a big commitment..I'm totally on board with you just this part I didn't agree with...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..
But you know as I read it again, I'm not sure you are saying meaning it the way I'm taking it...maybe you mean it like, not much research, effort to educate ones self about the product etc...I'm taking it like you are saying, ''gum, mints, yeah life ins on my kid, no big deal'...see?Posted: Sun Feb 10, 2008 12:38 am Post Subject:
Hey Lori,
We are so close to being on the same page. Maze, you, me, and so many others cannot imagine purchasing insurance on anyone without giving it a great deal of thought. WE ARE THE MINORITY and thus, that article was not written for you. Most insurance on kids is sold just like this:
"Mr. and Mrs. Jones, I want to thank you for completing your applications for life insurance. Because you have taken these steps to insure each other, it really shows your love and commitment to each other and the kids."
"Oh, by the way. We also have a small plan that we can put on each of the kids for only $12.00 per month. There is no medical required and they'll each be covered for $10,000 for a long time. What if I add those to your family insurance plan as well?"
And that's all the information they get. In their minds, if they were to question the policies, they would have to concede [psychologically] that their children could die. You've already shown very clearly how we as parents would rather avoid that issue entirely.
If you were a great mechanic, you would never purchase an automobile for your children without carefully examining every part of the car. If you're like the majority; if the kid likes it and it appears to be in good shap, we write the check and send the kid down the road - because we don't know any better. Just apply that train of thought to an insurance policy.
Posted: Sun Feb 10, 2008 01:17 pm Post Subject:
Ok, I get your point now....and you're right re: ins folks almost unable to see it from the stand point of zero or minimal knowledge.....I guess in my case when we bought the policys (way before I knew how to spell insurance)....we were buying only child life insurance policies and we really thought about it, (didn't research jack but thought hard on it)...to me it was almost an emotional thing...like buying it WAS admiting something could actually happen to the babies...... :(
Posted: Wed Feb 20, 2008 05:28 pm Post Subject:
It's a little disturbing thinking of what COULD happen. What ifs and shouldn't ofs can turn into nightmares. My parents have had a life insurance policy on me since I was young.
I believe it was only a $20,000 policy but every bit can help.
Posted: Thu Feb 21, 2008 01:01 am Post Subject:
Good answer...
"Life insurance generally makes a lousy investment, in large part because of high fees that drag down returns. This view doesn't make me anti-insurance; quite the contrary. I believe life insurance coverage plays a crucial role in any family's financial plan.
But that role isn't to provide an investment opportunity. Rather, the reason you buy life insurance is because it's the one financial product that can replace income if a breadwinner dies, which allows surviving family members to maintain their standard of living.
But this principle rarely applies to children. After all, unless your daughter is an incredibly precocious entrepreneur or making big bucks doing commercials for disposable diapers, you're not relying on earnings from her to support your family. So while your daughter's death would obviously be a personal tragedy, it wouldn't be a financial one.
In short, it makes little sense for you to devote your money to something that doesn't make it as an investment and that provides life insurance protection for someone who doesn't require it.
So what should you be doing to give your daughter a leg up financially?
Plan for your future
Well, the single most important thing you can do is to make sure your own finances are in shape. After all, the more precarious your financial situation is, the more difficult it will be for you to give your daughter all the things I'm sure you want her to have: a good education, a nice home, a chance to experience the wider world and, perhaps most important, a sense of security and stability.
You can begin building that solid financial foundation by stashing away enough money in a money-market fund or savings account to cover about three months' worth of living expenses. This sort of reserve will allow you and your family to weather emergencies such as unexpected medical problems or financial setbacks like a layoff with minimal disruption to your lifestyle."
Posted: Sun Jun 15, 2008 04:38 pm Post Subject:
Answer: Let me put it this way. I think almost anything you would do with your money, outside of buying lottery tickets or playing the ponies, would be better than sinking it into a life insurance policy for your daughter.
This person is against life insurance investment. I have the answer for this. It is good to invest on other things that can make your money grow much bigger. You can invest it on stocks, personal business, real estate or in anything, but spare even a small amount for life insurance. Life insurance investment is not for wealth accumulation. You will not earn money much money for it. But it can give what other investment cannot provide. And that is protection. Life insurance investment is all about wealth preservation. Life insurance should not be the source of your income, but it is very essential for the financial protection of the family.
Now about the question of is it good to invest on life insurance for kids, then my answer is Yes. Life insurance for kids can be considered as a forced savings for the kids' future. The cash values are built up plus it earns interest and dividends on the case of participating plans. Money placed here can serve as an emergency money in the future. It can be surrendered if the child needs money for school. Or it can be a lifetime protection if he or she has his or her family in the future. I am not telling you to invest all your money in life insurance. Invest on other forms of investment that can give you greater return, but never disregard life insurance investment.
It is really good to start on an early age. The premium is low and the interest accumulation would be higher because of the time value of money put into the life insurance policy.
Just a simple reminder: Life insurance is a product that you can buy when you don't need it, but cannot be bought when you needed it most.
Posted: Mon Jun 16, 2008 09:56 pm Post Subject:
Joven222: Do me a huge favor; NEVER use the terms "life insurance" and "investment" in the same sentence. In most states, there are specific insurance codes which clearly dictate the differences between those two products.
If you are an agent licensed to sell life insurance in America, trust me, the last thing you want to be part of is an investigation into the possible misrepresentation of life insurance products you've sold and the terms you may have used to do so.
Posted: Tue Jun 17, 2008 03:21 pm Post Subject:
Oh, sorry I don't know about that. I am from the Philippines and we treat life insurance as one kind of investment.
the last thing you want to be part of is an investigation into the possible misrepresentation of life insurance products you've sold and the terms you may have used to do so.
This is really interesting. Can you explain more about that. It really gets my interest. ;) You don't treat life insurance as an investment? Why is it that there would be a possible misrepresentation of life insurance products. I am interested on the laws you have their about life insurance selling.
Thanks in advance.
Posted: Wed Jun 18, 2008 09:04 pm Post Subject:
Hello Joven222,
Unfortunately, there isn't any sort of boiler-plate answer when it comes to using life insurance an investment. A clear benefit of insurance products is the tax-deferred treatment of the cash accumulation part of the policy. Of course, the higher your tax bracket and the longer you have until retirement, the more valuable this benefit can be. However, a very important disadvantage of using life insurance as an investment is the high fees and expenses that make it difficult to compete with the returns of even ordinary security instruments, such as mutual funds.
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