Juvenile Life Insurance: The Gift That Keeps Giving!

By Marc Manor

Very few people I talk to insure their children and it can be an uncomfortable subject to bring up. The very thought of losing a child is almost unthinkable. We all know children have lives that can end tragically, but fortunately they rarely do. Because the death of a child is so rare, it makes for the perfect opportunity to insure them. No child I know can pay the premiums, but if their parents or grandparents, take the initiative, they can open a door to financial security for a lifetime.

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Now I'm sure little Johnny or Janet would rather see a toy or a puppy under the tree at Christmas. But a life insurance policy stuffed in the stocking can bring an immeasurable amount of happiness throughout their lives. And it is so inexpensive, they can probably still enjoy those toys under the tree from Santa! So, let me tell you why I think Juvenile life insurance is the perfect gift!

Life insurance for children is usually very inexpensive

Children are the least expensive lives to ensure because according the actuaries (those folks that actually thrived in statistics class) they are the least likely to use their life insurance before the company makes its money on the policy. Therefore, it is a win-win for the consumer and the company. The investment for juvenile life insurance is pennies on the dollar as compared to an adult and it can be paid monthly, quarterly, semi-annually, annually, for a set amount of premium payments (i.e. 10 years), or all at once (i.e. “single pay”).

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Single Pay or defined period of premium payments.

I think this is the most favorable strategy for paying for a life insurance gift to a child. If the policy is paid totally up front in full or a set number or periodic payments, it can be paid off before the child is an adult and then they will not have to factor in their own premiums for life insurance into their budget unless they need additional coverage while they are adults. For example, if a single or “10 pay” (meaning 10 annual payments) premium life insurance contract is purchased, the entire contract can be paid up front, then no payments will be required. Once these children become young adults and have to start paying their own premiums, they may not see or understand the value of their life insurance and allow it to lapse (canceled due to non-payment). This is why I recommend the single pay or defined payment strategies that allows the initial owner/purchaser of the policy to fulfill the payments before the ownership is transferred to the child.

Doubling coverage at adulthood.

Some companies have policies that automatically double the death benefit when the child reaches a certain age. On these types of policies, they can pick up the same periodic premiums for twice the insurance.

Policy Cash Value Compounding

Policies on children can build significant cash value over the course of their lives. This cash can increase the death benefit but can also be used to fund important investments in their adult lives such as college or be used to augment their retirement savings.

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Life insurance is not taxable in most cases. That alone makes it a safe haven for accumulating a safety net for that child in adulthood. It can be life-changing if managed properly.

The issue of Insurability.

Over the course of a child's lifetime, events though adulthood, such as health events may occur that render them uninsurable. Diagnosis of certain illnesses or injuries resulting from an accident may make it difficult to insure some children and/or adults. Some life insurance companies will “rate” those so afflicted with increased premiums to cover the additional risk. If a policy is issued when a child is young, they will not have to worry as much about being uninsurable at some point in the future because they already have a policy that in most cases cannot be canceled because of something that developed after the policy is put in force.

More options for future insurance.

Other Options.

1. Universal Life. This includes “Indexed Universal”, "Variable Universal" and the like. It may be tempting to opt for universal life because of the potential for increased cash value and income tax benefits; however, I usually advocate whole life insurance for children. Many universal policies are structured in such a way that the cost of insurance increases as the insured gets older. In this case, the cost of insurance could eat away at the funding available for the investment side of the contract. Some universal life companies will tout the increase in cash value as the primary benefit of their product. But the policy, in most cases, lacks the guarantees that whole life brings. If you opt for a universal or “Indexed” universal life policy for a child, be sure you understand the limitations and all other aspects of the contract thoroughly before purchasing a universal life insurance plan.
2. Term Life. I don't usually recommend term life insurance for children because the term expires and then they are left with purchasing a new life insurance plan at a higher rate because they are older. That’s why I usually only recommend term for those who have other permanent life insurance or those who just can't afford the higher cost of permanent life insurance.

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The bottom line on juvenile or children's life insurance is that a permanent life insurance plan can be implemented at the lowest possible cost with the biggest potential of return on investment; and it allows the person to be fully insured for life before any illness or disability renders them uninsurable. I highly encourage anyone who has young children or grandchildren to talk to an agent about the opportunities to provide this remarkable gift. It is one of the safest investments to jump-start the financial security for the next generation! It is the gift that keeps giving and I can't think of a better birthday or Christmas present!

Marc Manor is a 30-year military veteran who is now dedicated to teaching his fellow Americans how to make the most of their Medicare and healthcare benefits. As an independent agent, Marc has access to a wide variety of carriers with an abundance of resources to find tailored solutions. There is no charge for a consultation so call 904-222-0698 or email: marc@marcmanor.com.