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Posted: 1 Aug '23

Planning for the Unthinkable: Buying a Life Insurance Policy for Your Kids

Planning for the Unthinkable: Buying a Life Insurance Policy for Your Kids

As a parent, buying a life insurance policy for your kids is one of the most important financial decisions you'll ever make. You probably know how important it is to protect your children, and you want them to be safe and have everything they need to lead happy lives. But maybe the idea of buying a life insurance policy for young and healthy kids doesn't resonate quite yet. In the sections below, we will discuss the different insurance policies for kids, why every parent should consider a life insurance policy for their kids, and how to choose the right plan from a reputable policy provider. Call us today to learn more.

Types of Life Insurance Policies for Children 

When it comes time to protect your younger ones, there are several life insurance policies to consider. But what policy is right for you and your kid? There are several factors to consider, but some of the most important include the child's age, health status, family needs, and budget. 

Ideally, there are two main life insurance policies for kids: Permanent and term life insurance. Before deciding which one to choose, let's explore how each of them works. 

Permanent Life Insurance Policy 

A permanent life insurance policy will cover your child until adulthood and usually pay out a lump sum or cash value. This cash amount is accessible once the child reaches the age of 25 and is often tax-free. As long as you keep paying the monthly premiums, this policy will remain active until your child reaches adulthood.

A permanent life insurance plan is a bit costly due to the cash value component, but it is an ideal option for parents who want extended coverage for their kids. The cash amount can always be channeled towards the kid's retirement, used to fund their education, or establish a financial legacy. 

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Term Life Insurance Policy 

Term life insurance is a short-term policy that covers your child while they're young, usually until they reach adulthood. This policy is available either as a stand-alone plan or as a child-term rider/ add-on policy accompanying the parent's term life policy. A term life policy is much cheaper than a permanent life insurance plan because it doesn't have an extended payout period.

Term-life policies are best suited for those who need coverage for their children temporarily. For example, if you want your child to be protected while they're young but be able to take overpaying their premiums once they move out on their own.

Why Buy a Life Insurance Policy for Your Kids 

There are many reasons to buy a life insurance policy for your children. First, it's an investment into their future and can help protect them from being financially vulnerable if something happens to them. Below is a quick breakdown of some of the main benefits of a life insurance plan. 

Lower Premiums 

One of the biggest benefits of buying life insurance for your kids is that the premiums are often lower than they would be for an adult. That's because children are generally healthier than adults, and their health will likely stay good for a long time. In fact, the younger and healthier they are when you purchase the policy, the lower the premiums.

Protects Your Child's Insurability 

Life insurance is a big deal because it's crucial to your financial planning and your child's future. When you buy a policy for your children, you're protecting them in a way that no one else can. You're allowing them to live on their terms and pursue their dreams.

Typically, your child can only buy and own an individual life insurance policy once they turn 18. And even then, they may not qualify due to a pre-existing medical problem or other factors. The right policy will help your child get started with a solid record of good health. This means that when it comes time to apply for another policy, they will have an advantage over other applicants who don't have a similar history.

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Financial Security 

Life insurance, especially a permanent life insurance policy, can be a great way to protect your child's financial future. It provides them with the means to cover the cost of their education, purchase a home, or start their own business. It can also help them support their family if something happens to you, the policyholder.

When you buy life insurance for your child, they must understand how much coverage they need and why they need it. You should also make sure that they know how to use it wisely so that they can maximize its benefits over time.

Longer Time to Accumulate Cash Value 

When you purchase a life insurance policy with a cash value for your kid, they will have more time to compound the money. That means they will receive more value and have more money available than someone who chooses another policy or investment vehicle. Life insurance policies also offer more flexibility when re-investing the amount or withdrawing from the account, which is not always the case with other investments.

How much is enough?

This is a question that most parents don't want to think about, but it is important to consider. When choosing a policy, you need enough coverage so the money will be there when needed the most. But how much is enough, and how do you know what kind of policy is right for your child? Consider these three factors:

  • Funeral cost. Ensure that the policy covers funeral costs. You don't want to put yourself in a situation where you still have to pay for the funeral out of pocket.
  • Ease financial burden. If one or both parents loses their income, the policy should help ease the financial burden of raising and providing for the child.
  • Your child's needs. Ensure that the policy meets your kid's needs once they reach adulthood. This may include the goal of going to college, starting a business, or buying a house.  

Choosing a Policy Provider 

When choosing a life insurance policy for your child, there are a lot of factors to consider. Here are some questions to ask yourself when deciding on a provider:

  • How much coverage do you need?
  • What kind of investment options does the policy offer?
  • Does the company have a good track record?
  • How long does it take for the provider to process claims?

To answer these questions, you must understand your kid's and your family's needs. It would help if you also did proper research to ensure the chosen provider is reputable and has been in business for a long time. A good place to start is to check the reviews of the providers you have selected. You should also compare the rates and terms to ensure you get the best deals possible.   

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Make it Work for You

Life insurance is one of the most important financial tools you can have for your family. It's not just about protecting your family from financial hardship but also about giving your loved ones options for the future. Even so, choosing a life insurance policy for your child can be daunting, considering the number of options available. 

That said, always do your due diligence to make the life insurance plan work for you and your child. Do you have an alternative way to support your child financially if something were to happen to you? If yes, how much money would they need each month, and would they be able to pay off debts and meet their goals? Make these questions a priority, and your plan will surely work. Call Vistaplan to have a broker answer all your questions today!


About the Author - David Motkoski

David Motkosk At the Helm of Vistaplan Financial Group

David is a well-respected insurance advisor with over 30 years of experience helping healthcare professionals, business owners, and their families secure their financial futures. He takes the time to make certain his clients understand the life, disability, and health insurance products they are purchasing, so they can make the right choices for their budgets, plans, and futures. CONNECT WITH ME ON LINKEDIN

Life & Disability Insurance for Alberta Health Care Professionals, Business Owners, and Their Families Since 1983