Do Kids Need Life Insurance?

Unlike kids, adults buy insurance to protect loss of income due to untimely death. In the absence of income generating ability, insuring a child seems to have ethical issue if not defying the fundamental of insurance.

Let's us explore a number of reason why people buy insurance for their kids. Some reasons may be controversial in nature.

(a) Investment

Some parents buy insurance for their children with investment as primary reason. There are 2 camps with opposing views, one is in support and another one goes against the idea. The former find it is a good idea. The latter finds it is a waste of money, they are of the opinion that money should be invested elsewhere. In their view, insurance charges and expenses have eroded the investment return.

(b) Education

In the past, insurance used to be a consideration when parents plan to set up education fund. Nowadays, as compared with many other tax-advantaged children education schemes such as Pre-Paid Tuition plans, 529 plans and many others, insurance has become less attractive as an instrument for parents to accumulate education fund for their kids.

(e) Future insurability

A more acceptable reason to get Child plans is guaranteed insurability, no matter what are the children's heath status in future. The kids will always have insurance coverage even if they later develop diseases so serious that they will not be to get any coverage if they apply for a new life insurance policy.

Future insurability is especially important if the family background exhibits less favorable health history. The parents may like to get their children life insurance to protect their children's future well being and also their children's dependents. The parents alone may not be able to take over the financial responsibility for the children's family.

In addition to that, at some point in time, insurance may not be an option but a requirement especially when we borrow loan to purchase properties we need insurance as collateral. Early purchase of insurance helps to make the premium affordable. Imagine our parents bought us life insurance plans when we were kids, when we take over the plans, the premiums we need to pay are very much lower than those are paid by our peers if they take out life plans at much older age. There are huge premium savings for us in the long run.

(g) Charity

Life insurance is always meant for those who survive. That's why it is called life insurance. It is always the saddest moment in life for parents to know their child is no longer around. There is nothing we can do to bring the child back. But the life insurance policy issued on the child life can help many people. The proceeds from the life policy can be donated to charitable organizations in the name of the child to help others in need. The child may die at tender age yet he or she can help many people to have better life.

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