Whole Life for Child ?

[Guest]

Hi, I am starting my new career tomorrow. Quick question please. Why will someone buy a whole life policy on a young child vs a savings account etc...? Other than the death benefit, ( which really would mostly benefit the survivors. It will accumulate some cash value over time but it seems to be only a small amount of the premium going into the cash value part of the policy. And the policy only adds the monthly average interest once per year. How can i demonstrate value here? Thank you!

 

[ctg]

One reason is guaranteed insurability later in life if the child's health declines.

 

[Sunny1219]

Are you going to be specializing in only Child life insurance? There really is little benefit from investing in those. I would rather see a parent invest in life insurance for THEMSELVES so that the child would benefit (child usually depends on the parent in most cases..) in the event of a parental death. Infact, speaking from a strictly financial standpoint, people who fear the "undue burden of costs" related to a child dying (funeral costs and such) infact are saving money in long run. They are no longer paying for the child. People are acting like a child's funeral is so expensive and they would "never be able to pay it" if it happened, well if you can't afford a possibly tragedy of a funeral for your kid, its a hell of a lot more expensive to raise a kid!
Some people say it has advantages because the child will have life insurance if one day he needs it for his family, but I just see that as looking way too far in advance. The priority should be raising the child and providing for a future in hopes he will succeed (college, down payment for house one day, etc) not that he will die. Most twenty year olds do not have issues getting life insurance, and to be paying into something since the they are a new born,(imagine what you would have saved if you put that in a bank account) that money would probably equal out if he just started a life insurance policy of his own when he has his own family.
If you are trying to sell someone something like this as an insurance broker, which it seems that is your new job, it seems most of these guys are working the emotional angle on the parents. The odds are, most children are healthy, and purchasing life insurance in the chance they will die and the parents can't afford a couple thousand to bury them, probably shouldn't have kids anyway, because children are a burden, and cost a lot more to live than the couple thousand (tops) it may cost to bury them.

 

[NYC Adam]

To see value it depends on what firm you are showing, how much coverage the parents have as usually that is the basis by which a company will quantify how much coverage you can sell on the child, what riders you are recommending, etc.

I think these plans have great value after the parents insurance programs have been shored up. The both preserve insurability and once of age the child can take over payments and ultimately ownership which is a good basis for teaching systematic savings in a safe environment.

As for cost, the insurance costs built in are WAY less than an adult because the insuring company is expecting an “mortgage” payment for 70 or 80 years…

 

[seeknulfind]

Well, gee, we bought life insurance on our kids when they were born. Not a lot but enough... just in case. We never, ever expected anything to happen but we've both known tragedy to strike - like the 6 year-old across the street who contracted leukemia. It happens.

Our other train of thought was, they would have a policy they could convert when they turn 18. And there is a small cash value.

Now on hindsight, if I was the agent talking to a young couple today, I'd consider suggesting a whole life policy for the parents with term riders for the kids. The riders could convert at 18 into a WL, meanwhile, the parents would be covered if anything happened to them AND, being young would get a better rate than if they waited.

Today, I was looking at the juvenile tables today and noticed that the rate on this table for a child at age six was actually more than for an 18 year old. Interesting.

One more thing... I realize I'm wet behind the ears so I'd be happy to hear other ideas about this.

Andy

 

[Full Throttle]

I own some on my kid (about $100,000), here was my thought process. One of three things will happen before my kid is an adult:

1. Die-the policy is not for burial costs, it is for my time lost off of work. I watched a family member go through this after his kid died at age ten, it was a disaster.

2. Not Die-Health Issues-has guaranteed insurability for at least some permanent coverage.

3. Not Die-Healthy (most likely)-basically I got my money back plus a little for inflation. I will either gift the policy to my kid or may use it toward a wedding fund, ect. $360/year is only $30/month, this is a very small amount of money, so I don't care much that the return was minimal on it. If the money is an issue, you probably should not be funding a kiddie policy in the first place.

 

[WinoBlues]

Well, gee, we bought life insurance on our kids when they were born. Not a lot but enough... just in case. We never, ever expected anything to happen but we've both known tragedy to strike - like the 6 year-old across the street who contracted leukemia. It happens.

Our other train of thought was, they would have a policy they could convert when they turn 18. And there is a small cash value.

Now on hindsight, if I was the agent talking to a young couple today, I'd consider suggesting a whole life policy for the parents with term riders for the kids. The riders could convert at 18 into a WL, meanwhile, the parents would be covered if anything happened to them AND, being young would get a better rate than if they waited.

Today, I was looking at the juvenile tables today and noticed that the rate on this table for a child at age six was actually more than for an 18 year old. Interesting.

One more thing... I realize I'm wet behind the ears so I'd be happy to hear other ideas about this.

Andy

I am a big fan of child riders as well. They normally allow non medical conversion to 5-6 times at about age 25. If a couple has 2+ children I can do more with the premium dollars by increasing coverage on the main bread winner.

I also like 10 or 20 pay GULs for kids.
- - - - - - - - - - - - - - - - - -

I own some on my kid (about $100,000), here was my thought process. One of three things will happen before my kid is an adult:

1. Die-the policy is not for burial costs, it is for my time lost off of work. I watched a family member go through this after his kid died at age ten, it was a disaster.

2. Not Die-Health Issues-has guaranteed insurability for at least some permanent coverage.

3. Not Die-Healthy (most likely)-basically I got my money back plus a little for inflation. I will either gift the policy to my kid or may use it toward a wedding fund, ect. $360/year is only $30/month, this is a very small amount of money, so I don't care much that the return was minimal on it. If the money is an issue, you probably should not be funding a kiddie policy in the first place.

Future insurability is huge to me. I have converted child term policies on some very sick young adults. One was in a coma.

Here is another thought. Before my middle son enlisted I bought a policy on him with WP. I verified that there was not "act of war" type clause for either death or WP. Just did the same for my youngest son. If one of them were to come back broken insurabiliy could become a problem.

 

[Sunny1219]

Here is another thought. Before my middle son enlisted I bought a policy on him with WP. I verified that there was not "act of war" type clause for either death or WP. Just did the same for my youngest son. If one of them were to come back broken insurabiliy could become a problem.

Do your sons support you? I thought that life insurance was for dependents in the event of the "breadwinner" of the famiy passing away. I know that military pay is very menial, so I am not sure what the incentive of getting them life insurance may be. If the son has a wife and or a child, then I could see those family members getting a pay out, but I do not see why a parent would need to cash in on a life insurance policy.
If you are banking on them coming back "broken" from the war, I still don't see how a lfie insurance policy would be needed, seeing as they... survived.

 

[VolAgent]

Do your sons support you? I thought that life insurance was for dependents in the event of the "breadwinner" of the famiy passing away. I know that military pay is very menial, so I am not sure what the incentive of getting them life insurance may be. If the son has a wife and or a child, then I could see those family members getting a pay out, but I do not see why a parent would need to cash in on a life insurance policy.
If you are banking on them coming back "broken" from the war, I still don't see how a lfie insurance policy would be needed, seeing as they... survived.

Let me guess, you just got your license, right?

 

[ctg]

It's not to "cash in" as you say. No one wants to "cash in" on their children's policy.

Frankly, I find your comment "If you are banking on them coming back "broken" from the war" a little offensive. I'm certain parents of our military are not "banking" on their kids coming home with issues. Please advise me if I got the wrong impression.

Future insurability is the key here.

Wino-Godspeed to your sons.