Do You Need Life Insurance for Children?

The short answer is that you do not require life insurance for your children. Surprised? We understand. Even the thought of something bad happening to your children is enough to make any parent nervous.

And it’s those emotions that life insurance salespeople are after when they try to sell you life insurance for your children. But it’s all based on a bunch of urban legends! Let’s investigate (and debunk) those myths and discuss what you should do instead.

What Is Life Insurance for Children?

Children’s life insurance is an insurance policy that pays a lump sum to the parents if their child dies. But here’s the catch: The sole purpose of life insurance is to replace the income of the deceased. And who has ever heard of a child with a job?

Even if you have a budding entrepreneur for a son or daughter (which we hope you do), it’s unlikely that you rely on their income for your own. So, where did the idea of kid’s life insurance come from?

To be honest, it’s marketing jargon designed to sell you something neither you nor your child require. Here’s the issue: Kid’s life insurance combines a great idea like life insurance—which is essential protection—with something completely unrelated.

Why People Buy Life Insurance for Kids

Advertisers, as previously stated, are excellent at tugging at your heartstrings. They make life insurance for your children sound like the best thing since grocery delivery. Here are some of the myths that prevent people from purchasing life insurance for their children:

Myth #1: It helps me save for my child’s education.

This is most likely a feature of whole life insurance for children. The monthly premium is supposed to accumulate savings for college. Isn’t that fantastic? Not so quickly.

First, the fees will reduce your return. And the return isn’t great—roughly the same as a traditional CD (certificate of deposit) from a bank. Not only that, but you’ll have to pay fees in order to receive your money when it comes time to pay tuition. In what universe would this be a good idea? Certainly not in the real world.

Myth #2: It guarantees my child can get more life insurance later.

Some parents and grandparents want to ensure that their children can obtain adequate life insurance even if they develop a medical problem at a young age.

The truth is that most people in their 20s and 30s can easily obtain a good term life insurance policy, so there is no need to purchase child life insurance.

Assume you decided to purchase life insurance for your children, and they later decided to carry their policy into adulthood. In that case, you’d both be disappointed to learn that the amount you can add to a child life insurance policy is limited. And in many cases, that amount is insufficient to provide for their family in the long run.

Myth #3: It covers funeral expenses and other costs.

Yes, funeral expenses would be covered by life insurance. However, the chances of actually needing it are so remote that you’d be better off putting the monthly premium payments into a savings account. Then you have control over the money and can use it for other purposes, such as removing your child’s tonsils. And that kind of emergency is far more likely to occur!

Alternatives to Children’s Life Insurance

How will you pay for burial expenses if you do not purchase children’s life insurance? We have a simple solution. Instead of paying premiums, save the money for an emergency fund. If you save three to six months’ worth of living expenses, you can easily cover the cost of a funeral—or any other unexpected expense that may arise along the way.

No worries if you don’t have that money saved up yet. You can add a rider to your term life policy (or your spouse’s) to cover your children. A rider is an addition to a standard policy. Consider it similar to adding bells and whistles to your car.

This type of rider is relatively inexpensive—around $50-60 per year—and it covers all of your children, regardless of how many you have, until they are no longer members of your household (as Dave did for many years).

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