Your kids don’t need life insurance

While I agree that the use of the term ‘investment’ is inappropriate for life insurance, I cannot disagree more with the title of this article.

While I am now a practicing professional in the business of financial services, including insurance, I once was just a regular joe working in corporate America. When I left that industry, I did not know one fundamental fact of insurance law in the US: group life insurance is convertable (without underwriting) to a permanant policy you can carry for the rest of your life!

This would have been perfect for my kids, since 2 of the 3 are no longer insurable: Insulin-Dependent Diabetic. I was not given the opportunity to convert. The company carrying that life insurance (and this is NOT the company I now work for) dropped the ball and did not contact me and this opportunity is only a short number of days.

Having a basic level of coverage on my kids for life would provide that base level of insurability for the rest of their lives. Something they can possibly never have now!

My parents took out dividend paying whole life on me when I was a baby. I have been able to use the cash in these policies for down payments on homes, cars ect. while I was getting established in the business world. I have always paid the money back to the policies and they continue to grow. Having access to this capital has helped me tremendously throughout life. My parents have pulled all the bases money that they put into these policies out and the dividends pay the premiums plus additional cash goes in because the didvidend is 4x the premium. Meanwhile, my 401K and mutualFunds are all down over 20% and it could take years to recover those losses. I have now started policies on my children and will teach them how to use them just like my parents taught me. By the way, if these policies are such a bad deal why would the nations top banks be dumping anywhere from 25% to 40% of their teir 1 capital into the exact same life insurance plans. HMMMM. We are talking billions here folks Look up BOLI(bank owned life insurance)

Okay, 1 more post from me.

From another poster:
“I love the possible big gains you can get in securities! But I have to tell you, after I learned about the way the wealthy use whole life insurance, I never viewed it the same! It truly is an awesome product due to the advantages and versatility it offers. I use Roth IRA’s and retirement plans also, but a properly structured dividend paying whole life policy is a great foundation and it also creates a second estate (the death benefit)-which allows you to spend down your other assets(401k,IRA’s, real estate,etc) while you are in your prime retirement years without fear of living too long and running out of money because—-when you die the death benefit will replace your spent assets(beneficiary gets tax free benefit) and if you live longer—you now have a very nice build up in your cash values to use!!!!!”

Hey, atleast this guy admitting he was a “Financial Representative”… but Im thinking an “Insurance Salesman” would be more accurate. I can imagine anyone also licensed to sell securities would EVER EVER EVER refer to Whole Life Insurance as an “Awesome Product”.

You want whole life insurance for life? If so, then expect to pay for life! If you ever stop sending payments, your “cash value” will dry up faster than a single drop of rain on a 120 degree windshield in Winslow, AZ.

Lastly, re-read that quote at the start of my post again from this other guy. People have trouble understanding a butterfly ballot and they supposed to make sense of that rambling about the supposed value of whole life insurance policies?

Give me a break!

Before you buy insurance for your child, make sure you have insurance on yourself. When I was 38 (Im almost 40 now), I went to intelliquote.com and compared term policies. I was able to purchase a $500,000 30-year term policy for appx $650/yr. My then 34 year old wife got the same coverage for appx $350/yr. Both policies are with AAA rated insurers.

If you want your child covered, get the rider at the time of your purchase (to prevent more paperwork later). Its typically a simple base amount, such as $10k.

The only time Id consider whole or universal type policies for a child is if, like others have mentioned, your concerned about future insurability. However, most of these policies are expensive considering the coverage cost per dollar.

Addtionally, so many kids today are financially clueless. I suggest you teach them about investing thru the purchase of mutual funds or individual stocks. For example, 10 shares of BestBuy (BBY) would cost you around $400. Then, the following year, maybe buy him 3 shares of Apple for around $400, etc etc. Make it fun!

Also, I plan to give my kid a credit card by the time he is junior high age at the latest. I will be a credit card with something like a $100 credit limit. He will have to pay me out of his allowance to pay the bill off, etc. My kids will know about finance!

I love the possible big gains you can get in securities! But I have to tell you, after I learned about the way the wealthy use whole life insurance, I never viewed it the same! It truly is an awesome product due to the advantages and versatility it offers. I use Roth IRA’s and retirement plans also, but a properly structured dividend paying whole life policy is a great foundation and it also creates a second estate (the death benefit)-which allows you to spend down your other assets(401k,IRA’s, real estate,etc) while you are in your prime retirement years without fear of living too long and running out of money because—-when you die the death benefit will replace your spent assets(beneficiary gets tax free benefit) and if you live longer—you now have a very nice build up in your cash values to use!!!!!
Think about it yourself and you will see…it is awesome to be able to have access to your whole principal and interest of your retirement assets instead of just living off interest/income of 5% or whatever your financial advisor tells you is safe because you don’t know how long you will live! I know its a radical concept and it took me a while to mentally adjust to it after chasing stock returns(I was a day trader)! When it comes to the protection and financial advantages of that old boring whole life policy….you will understand why the big mutual life insurance companies like Guardian are doing just fine (the company is currently paying it’s policy holders the highest dividend payout in its 146 year history!)…because the people in America who have money know where to put it—and you know that. But don’t just take my opinion or Suze tv host’s……think for yourself and check into it..read the details…and decide for yourself.Bottom line: No, life insurance is NOT considered an investment, but if used correctly, it will definitely enhance the assets and options you would have concerning the other areas of your financial life! The back and forth arguments about life insurance are endless and redundant, because most are only looking at it in a financial “vacuum”. Ofcourse you will draw different conclusions about whole life or term insurance if you only look at the product themeselves and not what else is occuring in that individuals financial world! If your advisor is not taking your whole financial picture into consideration when talking to you about life insurance, you are not getting the most efficient service!
When you are able to efficiently put together a synchronized financial plan, you can then get passed all the hype and misinformation and see how everything works out with the FACTS! So, until you are able to see this on paper with your own eyes and fully understand it, don’t be so quick to believe the “armchair” financial gurus—this is what is called, financial noise!

Stephen Weik
Financial Representative

It all depends on the rate of return on that “cash value” policy. Obviously if a standard savings account will give you a bigger return then go ahead.

Bottom line ensuring insurability is the biggest reason to open some kind of policy for your child. If you can lock them in for a fairly low rate and large amount of coverage, don’t you owe it to them rather then saying “Here’s a small savings account, have fun with those medical bills.”

Avoid the Mail schemes, but search out a reputable company to set your family (all of the members) up with the proper protection for now and later.

Wow!! I have done some research into life insurance but do not claim to be an expert. In 1985 the Federal Trade Comission (FTC) did a report on “Life Insurance Products and Consumer Information” and it highlighted that most americans are uninformed and don’r really know what they are buying. This report did does discuss “Cash Value” and “Term” insurance. This report done by economist suggest that a “Buy term and invest the difference” philosophy may be the best approach. It points out that the “Savings” offered by whole life, variable life, universal life etc have below than average rate of returns. I have one question to those who sell anything but term insurance. If a person buying a “Cash Value” insurance policy has to pay back money from their own “savings” (usually between 6.00% - 8.00%) who’s money really is it?? If I go out and buy a term policy and invest the difference in a plan that I control doesn’t that make more sense? Also my research has found that when purchasing a “Cash Value” insurance that I would be paying for 2 and getting 1. ex. if I purchase a “Whole Life” policy for $200k face value and pay for 25 years I may have a living benefit of say $150k. If I want to get that money I would have to borrow it at 6%-8% or have it come off my face value plus interest (Doesn’t sound like my money) If I die my beneficiaries would only receive $200k. What happened to my “Savings”?? Oh yeah…the life insurance company keeps it. Talk about rip off. I will end with this. It is better to have some insurance rather than nothing at all. If you buy only buy Term, you agent will only try to sell the other stuff because they make more comissions on whole life, universal etc. Good Luck to all

My grandmother purchased a policy on me when I was 3 months old - so now I have a universal life insurance policy that is not only dirt cheap, but pays for itself. When I got married, she graciously allowed my husband to be named beneficiary. We pay hundreds of dollars a year for insurance on my husband, but we pay nothing for me and I am covered. It didn’t pay for college or a downpayment on a house, but we did use a little money from it to help us get started after the wedding. I couldn’t be more grateful to my grandma!

Blanket Statement Indeed. I know a young couple with 2 children that lost a baby to SIDS. Not having the $$ to pay funeral costs added salt to the wounds. Adding a child to the parents customized term policy (just enough to cover an unexpected funeral) costs very little and with the right company guarantees the child’s insurability up to 5 times the amount when grown.
I, too, believe in buy term, invest the difference. With permanent life insurance you pay for 2 things and only get one. Please read those policies before signing! Most people, sometimes even agents, don’t know how they work.

I don’t believe the author made a blanket statement that kids don’t need insurance at all. He’s simply making the case that whole life insurance is beyond terrible as a means of securing little Johnny’s future. Get a term rider if you must have insurance for your child, but whole life insurance is a rip-off. You should be able to handle a child’s burial expenses. If you can’t right now, then you need to get to that place soon!

Don’t blame the economy, genetics, or any other strawman for not taking care of your family financially. The chances of a parent needing to bury a child is remote. The chance that a family needs $5-10K in the bank for ANY emergency should be a motivating factor itself.

Buy term and invest the difference. Save up $15K cash. Stop spending more than you make. Take the kids to the park and stop worrying about what you’re going to do if they die. Enjoy them while they’re alive. Once they’re adults, insurance is their problem.

Insurance products can be great financial tools if suitable for that person. Let’s not forget the tax advantages of permanent life insurance…which the gov’t doesn’t like and in 1986 they created a line in which addiitonal contributions will be treated like a qualified plan …taxed. If funded PROPERLY, which unethical agents don’t seem to understand, the living benefits of cash value life insurance are amazing: tax deferred growth, tax free access to your money (great emergency fund, college fund, retire sup fund), judgement proof, collateral, liquidity, unlimited contributions and control…this is the big one as most consumers are not in control of their finances…the financial institutions are because they know the rules and you don’t, which means they win. Life insurance can be complicated to most, but it provides protection and control for when life happens!

The number one reason to insure your child is to protect their insurability in the event that illness or an accident leaves them UNinsurable. Not to mention that for some people, the cost associated with final expenses (especially if medical costs are involved) do create a financial problem. If the objective is to save money for the child, there are better ways to do this…for children a variable annuity is a good option, since they can’t contribute to an IRA or a ROTH until they earn income.

When I was born, my parents took out a no-physical needed cash-value life insurance policy on me. I had been born with a heart condition, and they were concerned that I would never be able to purchase life insurance because of it.

I’m fine now, I have ridiculously cheap term life on myself thru work, but I still have the cash-value policy as a back up. Even if I stop contributing to the premiums, the cash value is sufficient at this point to pay the insurance should the heart condition resurface and I’d need to quit my job, thereby leaving my cheap term life behind, and still leave some money for my husband.

How was this a bad decision in my situation?

That’s a problem with these kind of financial columns - they DO make financial sense, but that is not always the best course of action. Peace of mind and a persons psychology need to be taken into consideration as well.

With respect to this subject a WHOLE LOT of psychology needs to be taken into consideration.

Russel from San Antonio hit the nail on the head for this issue.

I didn’t take out Life Insurance for my daughter when she was little - for the same reason that you explained.
While in College - at age 18 - she was diagnosed with severe Asthma. Now she is 26 and can’t get Life Insurance - except through her employer offered 100% of her base salry plan. Their insurance company won’t accept my daughter’s applications for voluntary additional insurance.
I wish I would have take out insurance for earlier - but now it is too late.

A true expert would never make a blanket statement such as the one made above. The reality is that until you understand the whole of one’s situation, you shouldn’t offer input or advice. It’s disrespectful to the person and it show’s a level of professionalism that’s embarrassing. While I agree that a mail offer anything is typically a bad deal, buying life insurance on kids from a AAA rated company can be a great use of funds. I enjoy reading your articles as it they’re evidence that you don’t actually have clients.

Your advice is correct in part in that those ads for the life insurance policies you buy through the mail or online etc are usually small and poor policies and not worth the money. While kids do not need life insurance, many parents are buying life insurance to protect their kids insurability for when they have their own family. They are not doing it for cash accumulation. I did that for my son and bought a fairly good size universal life policy which cost me next to nothing. When he became 16 he was diagnosed with kidney failure and that now makes him uninsurable. He is now 21 and on dialysis living a fairly normal life. While the amount of insurance he has will probably be less than what he would need when he has a family…it is better than nothing. I am only sorry that I did not buy more since it was so cheap but frankly the stigma of carring so much life insurance on my child prevented me. Wish I would have swallowed my pride. A financial advisor for 30 years now, I have seen many good reasons to buy life insurance on children, like the 30 year old which was in my office recently and has a 100,000 whole life policy his parents took out on him when he was born, which he pays less than $100 a year for the coverage. How many of us breadwinners wish we had a permanent policy like that laying around our house. I repectfully point out again that your advice paints with too wide a brush and parents should consider protecting their children’s insurability with a portion of what they might spend at Mc Donalds every week. Statistics show that 1 and 10 children are uninsurable by age 21 and increasing in accordance with with increasing health problems due to American’s lifestyle, diet and obesity. Believe me, no honest insurance agent is making much to write insurance on a kid…the paperwork is not worth the pay. The rates on what you buy through the mail, TV or online are usually much greater than what you can get your kid from a reputable A rated life insurance company.

There are many good reasons to take out life insurance on your children (none of which assume the child will die prematurely). The first being they will need life insurance when they are older and have a family of their own. Having a policy already in place (and possibly paying for itself by then) will give them a great head start in protecting their future. The second being the ability to “guarantee” their insurablility in the future with a rider that allows them to buy insurance several times over their lifetime without evidence of insurability. Children sometimes grow up and develope conditions that preclude them from buying life insurance as adults. The cost of a “real” life insurance policy on a child is nominal and should not affect any family’s financial world. Sometimes children do pass away and the death benefit will allow the parents time away from work to grieve and possibly deal with their other children’s emotional problems from losing a sibling. Walter’s answer to this question was paathetic and narrow-minded. He should stop comparing life insurance to investments and wake up and realize all people need both products in their lives and the best time to buy life insurance is when you are young and healthy.

Sorry but I cannot agree with
Walter’s article on “Kids don’t need life insurance” I
actually patronize Manulife for 2 juvenile policies for my
2 kids in 1988. I found out their plans generated much better cash returns than my
own adult plan, and of course,
better than bank savings too.
This means adults can derive more profits from life plans purportedly under kids’ names,
though death compensation is
remote. About 6 years later,
Manulife offered stock scripts
to participating juvenile plans under Demutualization.
When I redeemed these 2 plans
upon emigration, the total value was about 5 times of my
original input.

The whole “avoid catastrophic expense” crowd are missing an important point - you don’t have to pay it all at once. Some form of loan (a credit card if nothing else) is pretty much always available to spread the cost over a long enough time to keep the cost per month doable. Sure, you pay (substantially) more that way than you would for the insurance, but given the odds against needing to pay it in the first place, it’s still a better deal.

Insurance is best used when there *isn’t* another option available to cover the same eventuality. In this case, the sum involved is small enough that there is.

Your painting with a broad brush does many of your readers a profound dis-service. Simply, ask anyone who ‘bought term insurance and invested the difference’ in the markets over the past 6 months how deep the hole is they’ve dug and what future rate of return they’ll need / how long it will take for them to make back just the principal they’ve lost{forget about any gain}. Term life insurance, while cost-effective - in the near-term, is a hole in the ground in the long-term. As term rates rise - which they do with age / the closer one gets to the end of their mortality, the affordability also diminishes. How many retirees can afford to keep up their term insurance [to protect their spouse, etc] when their incomes drop on retirement? Those retirees who have their incomes dependent upon portfolio rates of return aren’t seeing anything but significant reductions in their incomes today [as most all underlying costs of living are rising]. What’s a surviving spouse going to do - eat cat food? Furthermore, buying a base whole-life policy with purchase option riders for children is the best [hands down] way to assure their future insurability. Of course, term insurance has a place as a part of a life insurance portfolio for young families {as well in some business circumstances}; however, to rely exclusively on it {term} is to defer the judgement day [in more ways than one]. The article/posting shoots very low for the most common denominator and anyone with any net assets and/or the hope of helping their children get a leg up later in life should include some whole-life with purchase options as a part of the asset protfolio they secure for their children.
I’d suggest that Mr. Updegrave go to his local library and take out a book on ‘life insurance 101.’

Bear in mind these facts about Life insurance, for any age…

1)We will all die
2)We buy insurance to protect not to make money.
3)Insurance will become more expensive as we get older.
4)Proceeds in Canada are tax free (not sure in US)
5)Ownership is transferable.
6) Proceeds are paid when you need it most (death of a loved one)

There are probably many more reasons for life insurance. Anyone who is concerned with sound financial planning will see the need for some type of life insurance. The type and amount would depend on ones overall goals.

I think issues are being confused here.

The burial, investment, and insurability issues that Scott listed below are separate things. The amount of insurance you need for burial is FAR less than what is necessary for investment/insurability issues.

Granted if you really do not have enough in savings for the burial then the insurance may be worthwhile but in general you are better off just building your savings. Regardless you should not let an insurance agent use the burial argument as an excuse to get you to buy a hundred-thousand-dollar policy.

The investment/insurability arguments are nonsense. Insurance is a terrible investment and you are virtually guaranteed to pay far more in insurance premiums during your child’s life than they would get out in life insurance later. If future insurability is a major concern you are better off putting away money for them as a nest egg instead of paying it to an insurance company. One could argue that there is remote chance that you might come out ahead buying the insurance now but that chance is so remote that it is the same as many other calamities that could happen that you cannot buy insurance for. In other words, there is a point beyond which you have to accept that bad things can happen and not let fear drive you to make foolish choices. The best financial defense against those one-in-a-billion calamities is building your savings.

My, lots of vocal folks here who have no particular concept of risk!

A $20,000 term life insurance policy on my son costs me about $4 per month with double indemnity for accidental death.

One latte per month.

My son dying would be horrible. My son dying AND the financial stress of paying for his death (medicals insurance doesn’t cover being far more significant than “final expenses,”), to say nothing of the costs that stress (financial and otherwise) would be for my OTHER children….

Are you getting the picture now? $4 per month is worth sleeping just a tad better at night.

On to the insurability arguments, etc. - the cheapest term policies don’t do anything in this regard, and the expensive ones that do are not worth the coin - our advisor here is correct, invest for the best.

Now on to the financials: $4 per month over an 18 year lifetime, inflation adjusted and totaled comes out to about $1600 worth of opportunity lost in the 19th year of the inflated dollars presented.

During that 18 year period I would have spent (all inflation adjusted to the 19th year):

$1600 in my son’s insurance
$22,000 on lattes
$75,000 on transportation (bare minimum)
$100,000 on eating out
$200,000 on tuition - private & college, 2 kids
$350,000 on food
$700,000 on a mortgage
$2,000,000 on taxation

Getting it now?

This is upsetting that you would not want a child to be protected. Life insurance is just not to be used at the time of death. It is also to protect the child as may develope an illness that would disqualify them from ever getting insurance when they get older. I am now in the insurance field but before I was I am glad I knew enough to pro tect my children, My oldest child at the age of 9 was diagnosed with diabetes. He died later in his short life. If I had not purchased the life policy we would not had had enough to bury him. It is never to late to get life insurance for your children or grand children. I have 7 grandchildren and I have a policy on each one.

So there have been three reasons for buying children life insurance mentioned here - none of them really hold up to scrutiny very well.

1. Investment: Using life insurance as an investment is pretty much strictly inferior to buying term and investing the difference. The only people who disagree with this are those who make their living selling insurance - surprise, surprise. One down.

2. Covering final expenses: The “don’t have a $10k emergency fund” is a pure straw man in most cases. Even if you don’t have an emergency fund, you can go for a personal loan or other form of credit (e.g. HELOC) - the payments won’t be much more than the premiums on a policy, in the unlikely event you have to pay them at all. And if even that isn’t an option, your financial situation is so bad that you have MANY more critical things to worry about and spend that money on. For that matter, there *are* inexpensive funeral options available - and choosing to spend your money on an insurance policy to cover a better funeral is downright irresponsible when your child’s (and your own) financial security are much better protected by saving the premium money instead. Two down.

3. Future insurability: This is the only one that stands up to scrutiny at all. But in order to get enough future insurability to make a real difference, you’re going to have to pay through the nose. Questionable if it’s really worth the money in general, though it can be for people with threatening family histories.

The death of a child is a hard burden to bear. It tskes a toll not only financially due to the funeral but also the physical and mental toll it takes on the family. The purpose of the insurance is not just to cover the burial and funeral but also to allow you time to grieve without having to deal with having to work to get the money to pay your bills. I have insurance on all my children, even my two grown step children. I would want to make sure I was of some help if something should happen to any of my children so as to help with final expenses and to make sure I had the moeny to attend.

I’ve seen parents whose child has died have to hold car washes to get the money to bury that child. A small life insurance policy prevents this. This is not an investment, but a “hope I never have to use it” purchase.

i also sell insurance, we offer a product called 15 pay life. you pay for 15 years and then never again. i recently purchased this on my newborn great niece. 25k plus a guaranteed insurability rider allowing her to purchase 25k more life insurance every 3 years from 17 - 40 for $300 a year. by the time this is used it will likely be worth 50-75k for just the original portion and it protects against uninsurability as diabetes runs in our family. it is not an investment but a safeguard of her ending up like he mother, a 22 yo who would have to pay as much as a 50 yo because of diabetes. not only will this protect her from uninsurability but it will provide her with at least some insurance when she first starts a family and just cant afford anything.

Any blanket statement like this can be dangerous. As a CFP, CFA & IAR I believe Life insurance is something that MOST people need but is not always necessary. If God forbid you had to suffer the loss of a child then would you rather pay $5-$15 a month of $10,000. My son has had many medical problems since he was 2 months old and if I had not purchased a Whole Life plan for him he would never of qualified for anything in his entire life thus not providing anything for his future family. I do believe buying term policies for children is morbid b/c that is solely based on them passing where at least for only $5 more a month you can have the benefit of whole life. The most important thing I can stress is when considering purchasing any of this meet with a Financial Planner b/c they will look at you entire situation and address your concerns and let you know if you have bigger problems to worry about, like an emergency fund. Another important thing to watch for is when buying life insurance from anybody look at the companies Financial Security Rating, “Weiss Ratings” and “The Streets” are 2 of the best. This will let you know how financially secure a company is b/c you want to make sure that when buying life insurance (especially for children) that the company will be able to pay that benefit in 50-80 years.

I disagree with Walter’s assessment, but I’m looking at it from a different perspective. While I realize that life insurance policies are lousy investments overall, getting a life insurance policy for a child ensures that the child will have some life insurance coverage as an adult (provided you choose the right policy). For example, my parents purchased life insurance for my sister and I, as well as my sister’s 2 children when we were all babies. While I’ve since obtained affordable coverage on my own as an adult, my sister was diagnosed with pseudotumor cerebri (in her very early 20s) and would be ineligible for life insurance (or at least affordable coverage). But the policy will ensure that we will have enough to bury her. And I’ve checked the policy over and even if she lives to it’s maturity of 95, the premiums would not even come close to exceeding the death benefit. As for my niece, she has been diagnosed with Celiacs Disease (age 11), which can lead to many life-threatening complications, that would likely interfere with her ability to obtain affordable coverage as an adult. So in their cases, it’s a good thing that my parent’s purchase coverage (even though the policies are probably going to just cover the funeral costs).

Now with this in mind, I would only recommend whole life policies since they tend to last until the person is 95, the premiums are generally the same, and they lack the “variables” that some of the other policies include, which can hinder a policy’a practical viability. Plus, with traditional whole life policies, the insurer can provide you with a table of cash surrender values so you can tell how much you’ll be able to get back over time if needed. Once the child becomes and adult and obtains their own coverage, the policy should probably be surrendered.

There is such a thing as insuring their insurability. Especially if you have a child with problems like mine. She has Down’s Syndrome.

The only rebuttal that I would have on not purchasing insurance for a youngster in the household is this. There is a certain percentage of the population that has a tough time finding life insurance later in life due to the onset of an illness. i.e. diabetes etc. Having purchased somewhat inexpensively a $25,000 policy for each of my 3 children- I guaranteed their insurability into adulthood. My oldest got married, has insurance of her own now. I gave her the cash value of the policy to purchase furniture for her new house. A good investment program- no, but you can do that on the side

I disagree with the general statement kids dont need live insurance. If god for bid they die this could be a hardship for the surviving family. They do need a samll policy for this reason. Its cheap and not considered and investment. Secondly, with Americans in such poor health, some kids will develop some conditions which they will never become insurable. So purchasing a small policy with abiltiy to increase it without medical examination has its place. I had a friend who developed diabetes at age 15 and died at age 34, he did not have enough insurance for is wife and 2 kids. Given he may not have been able to get the proper amount even with a policy I described his family would have been better off.

As an insurance agent, I am frustrated at how many people I talk to that don’t understand the purpose of life insurance. You don’t go into department store and tell the salesperson, “I want to buy something that is worth $100K, pay a monthly premium, but I am not sure what I want.” Life insurance is not meant be a lottery ticket to a better life, it is to protect assets. The only reason children would need life insurance is the terrible chance that something could happen, like a car accident. Otherwise, no they don’t need life insurance.

The purpose of life insurance is two fold, first to replace the income of the insured and second to cover final expenses. In the case of an adult, the amount of insurance is dependent on your family needs and can be summed up with the formula DIME = Debt, Income Replacement, Mortage and Education. A simple estimate is usually 8-12 times a person’s annual salary. In the case of children, the amount of coverage is dependent on covering the final expenses (usually $8,000-12,000). Most middle income American families do not currently have enough liquid funds (i.e. Emergency Fund) to pay for a funeral out of pocket. Who wants to pay a monthly bill for the loan they took out to bury their child? Even if they do have the funds, it still makes sense to provide coverage for children to guarantee insurability for them in later years. However, there is only one kind of life insurance that any family should buy - and that is Term insurance! In fact, the best coverage is provided in a single policy that provides coverage for the primary breadwinner, the spouse and the children using various Riders. Primerica made the saying famous, “Buy Term and Invest the Difference”. All retirement, college education, and short term investing should never be bundled with an insurance policy. Mutual Funds are the best, most economic way for the average family to invest for these needs. In the end, a family should seek financial assistance from a licensed broker in determining their insurance needs and laying out a finanical game plan to become debt free and financially independent!

After reading all of the above comments I can understand why the average person is confused about life insurance and why so many people refuse to do anything to protect their family or purchase a financial produt. Thanks for adding to the confusion and for making me feel better about bury my money in the backyard.

My parents bought a whole life insurance policy for me when I was 1 year old for $10000. I am now 33 and the cash value is $2250. Do you think this is a good investment? I think that if insurance gives you peace of mind then you should get it but just get term.

I agree that it is lower on the list than coverage for the parents…but to flat out say no is a mistake.

I write 50K UL policies with 50k of guaranteed insurability with 11 option dates. That is locking in $600000 of coverage for life.

Ask me if the parents who have two teens sons with juvenile diabetes are going to exercise those options? You bet. That may just be the cheapest insurance they ever get.

I just love you guys (and gals- suzee) blanket pronouncements on what to do!!

While this is all well and good, you say that the child doesn’t need life insurance, But I for one cannot afford to pay for the funeral expenses in the event of an untimely event of a childs death. Those expenses are now in the vacunity of $7000, at a minimum. I just don’t have that kind of money lying around to pay for something like that. I do have coverage for the one child that is under 21 years of age. Because in that event, I as a parent wil be responsible for the final expenses.

As an Insurance Rep I have seen one too many families suffer when they have a child who died from injuries incured by an auto accident. If that accident is at no fault by others then you are stuck paying your own meidical bills and fineral expenses. At the same time when your child doesn’t bring money in it still costs money if, god forbid, they happen to pass on. The particular policy that doubles in coverage is like purchasing bonds, it’s better to do it through life insurance because the government doesn’t tax you on that money. She will also be able to borrow money incured through the policy for things like school. I am a strong believer in life insurance for everyone. Buy it now while it’s cheap and do your child a favor. In several years they could have health problems and be totally un insurable. Why risk that when you can have a hefty policy for $20 a month?

I disagree about the no insurance for children. We have $5000 policies on both our kids. Why? In case of the horrible possibility one passes away. The $5000 would help pay for burial and related costs.

The problem with articles like this is that they make blanket statements. Life insurance can not only be a GREAT PLACE TO SAVE MONEY in a tax efficient way as a FIXED INCOME ALLOCATION but should a childs health change over the years an additional purchase benefit will insure that they at least have some coverage for when they have their own families. There are probably only 4 companies that have the financial strength to do this correctly which is why your “mom & pop” property and causulty guy will tell you its a bad investment. Obviously if your credit cards are maxed out, or you are not even maxing out your retirement plans then you probably have bigger problems which is the typical audience of Updegrave and Suze Orman.

I strongly suspect that the Whole Life Insurance Salespeople organization passed an email around telling everybody to comment on this page, and that’s why there are so many. The best point I’ve seen from them is that it’ll cover your funeral expenses in case of the child’s death. In response, as others have said, if you cannot support the $5-10K of a funeral of a child (who you don’t need to feed, clothe, etc. anymore), then you have bigger financial problems than the very low possibility of your child dying. Put that “couple hundred dollars” into your child’s LIVING well being. Pay off your debt, buy them some toys, feed them, invest in their future education.

Please stop trying to sell your iceboxes to the Eskimos.

Not sure why the media is always against whole life. But buying whole life on your kids can be a nice gift for them. Plus it provides them insurance if they are uninsurable at the age of majority.

For families with children a prudent recommendation is to get a CTR rider, child term rider. It costs $4.40 per month for all kids in house hold for $10,000 worth of protection. Are you not tired of seeing TV and newspaper adds of loved ones holding a car wash to burry a loved one. It does not have to be that way.

I am relieved that I purchased a whole life insurance policy that will be paid up at age 65 for my son when he was 1 month old. His policy costs me about $28 per quarter and that premium will never increase. I believe it is worth every cent. He was diagnosed at the age of 2 1/2 with Juvenile Diabetes. If I hadn’t purchased this policy, he would have ended up paying sky high premiums because of his health, if he could even get insured! I also added a guaranteed purchase option so he can increase his insurance coverage at certain ages without having to go through medical underwriting.

People get ripped off by insurance because they don’t do their research and aren’t educated.

I have read through a majority of the comments about this article and there are many good repsonses to this article. I have nothing against insuring your child, and I understand that it obviously was useful for some based on the remarks. I would recommend that people also look at there auto policies as some carry funeral expense which would cover anyone in the household in the event someone might be killed in an auto accident, also loss of wages. They cost so little I would recommend anyone who can buy them, as it depends on the state who live in, do it now!! AS a previous agent with licenses in Life, Accident, Health, Property, Casualty, and also being a Registered Representative in the financial industry, I feel I can “educate” you on what I know about these things. First off, DON’T BUY insurance as any type of investment vehicle, just a bad move. There are so many other ways to invest, and make better returns. Secondly, stay away from annuities, not a very good investment vehicle, fees, fees, and more fees!!!!!!!!!!! If your employer offers, be sure that you are getting all available coverage. Some companies offer policies under the corporate insurance policy that offers free coverages and even cover spouses and children also. Even the death of a child. I read so many people talking about what if your child dies. I know it can happen, but the odds are so highly unlikely. If you feel the need though, do it. What people should be concerned with is how they are going to pay for their mortgage if they lose their job. Odds are this is more likely to happen than your child dying suddenly. Everyone should have an emergency fund of minimum of 6 months equivalent to bills you have. I would say on average, $8-$12,000. It is fairly simple to do, regardless of your income. If you and your spouse both work you can do this in a reasonable amount of time. It has to be done. Do whatever it takes to get there, if you say you can’t, you are lying. I am a single father witha mortgage and car payment who pays $750 per month for support and expenses for 1 child and I managed. AS stated already, buy term life and add the child rider to it, it cost nearly nothing. Stay away from whole life!!!!!!!! Keep in mind, if you have a home with equity in it, you can have an active line of credit in the event you have a tragedy, and can draw on that. I think people should honestly be more concerned with if they can survive if they lose their job, with the way the ecomy is right now, instead of worrying about something that odds are, and pray to God, won’t happen. It scares me to read about people saying I don’t have $8-10K laying around. I know people live paycheck to paycheck, I am far from rich, but people need to prepare for emergencies that are more likely to happen!!!

I agree that life insurance is not a place for a child for investment reasons. Cash Value policies are truly a lousy place to sock away money for things like college. And I agree with the fact that one should first set the goals of protecting breadwinners, etc. However, I disagree with life insurance not ever having a place for children. Case in point: I purchased life insurance for my children with special riders attached to the policy. The name of the rider is the Guaranteed Insurability rider. Basically, this rider will allow my children, when they are adults, to purchase extra amounts of life insurance throughout thier lifetimes, in certain age intervals, without proving thier insurability. This is a tremendous gift to a child who later marries has children and discovers that he/she is uninsurable for health reasons. So if you have completed your priortized financial goals and have a few dollars to spare then buy a permanent life insurance policy with this special rider and your kids will love you for it later in life.

Its a suckers bet.

We have a small term policy on our son- very inexpensive. Why? Not because we will lose the income of our elementary school aged child, obviously. It’s because I don’t believe that my husband and I would be going to work for a while if the worst happened to our child. Our employers, while sympathetic, wouldn’t be paying us during that time. Tack that temporary loss of income onto possible medical bills, the grief counseling I would certainly be attending and all the other “final expenses” and we’ve racked up a pretty big bill.
I agree that insurance should be totally seperate from investing, however, I believe most families would do well to have a small policy to cover expenses if the worst happened to their kids- at least finances would be the last thing on their minds.

Let’s not discount the fact that permanent insurance is first and foremost, permanent insurance. It’s best purchased as part of an insurance portfolio (along with Term) for those that realize they’re likely to outlive their Term and well into their retirement years and would like the death benefit to help make sure their survivor has enough money after they’re gone. There are probably dozens of assumptions people make when assuming they’ll be self-insured and won’t have a need for coverage in their old age (tax rates, inflation, rates of return, lifestyle, lifespan, they’ll always be healthy, they’ll always be employed and able to save, they won’t have to take care of Mom and Dad, etc.). What if they’re wrong in one of the areas? What if you pass away and leave behind medical bills you didn’t count on? And then your spouse also happens to live 10 years longer than you planned for? How will their planned lifestyle have to be altered? Also realize that the more wealthy someone becomes, the more they typically realize the benefit of owning something vs. renting, and also the benefit of having coverage that can help pay possible estate taxes at the second death.

Not everything is an investment decision. Any good agent will tell you you don’t buy permanent insurance because it’s the best investment in the world. It’s not designed to be. But it does have some nice investment-like characteristics.

If everything was an investment decision, then we’d all be leasing our cars, which would be 20 year old Geo Metros, and living in apartments, all so we could “invest the difference.”

Let’s get something straight right away: Insurance rates are based on risk. The reason rates are so low on a child policy is because the risk of ever paying off is equally low. The low rates doesn’t mean it’s a good reason for buying a policy.

The obvious reason that most insurance agents/companies will recommend a policy is simple: THEY MAKE MONEY ON THE TRANSACTION! Nothing wrong with that, but be aware they are acting on their own self-interest. Advancing the argument of insurability is both bogus and disingenuous. Actuarial studies will most likely point out that the likelihood of your child being uninsurable in their 20’s-30’s is extremely small.

As far as the comments regarding Whole Life and Variable polices, they are designed to benefit the bottom line of the agent and company versus the policyholder. Insurance agents will almost always recommend the products they been trained to sell. I don’t think you’ll ever hear a Ford salesman recommend you purchase a Chevrolet Impala. Consider the source.

Walter Updegrave, I have NO Idea how you consider yourself to be an expert of ANYTHING to be honest! I work for a top-rated insurance firm and let me tell you that with tax-deferred growth, long-term growth in insurance amount, and a cash value that will far and awway outpace the cash outlay, please tell me how it is not a good investment? Not to mention the fact, that if you get it with a AAA rated Mutual company, the dividend and option to purchase insurance later on in life with NO medical will become a phenomenal asset to your children! You REALLY need to do some more research before you tell people what to think! Have a nice day.

The only REAL reason to purchase whole life insurance for a child is to protect them if at some point in their lives they become uninsurable. i.e. they get leukemia at 5 years old, or they injure themselves severly, at that point they are uninsureable most likely for the rest of their lives. These small policies can usually be increased on an annual basis, this may be the only life insurance policy they ever have. I had a client who just turned 28, and found out he had prostate cancer. All he had for life insurance was 2 $25K whole life policies that his mother bought when he was an infant. That is all he will have for the rest of his life. Also he used the cash value to pay some of his out of pocket medical expenses. If your insurance company is charging you a fee, you are probably not with a reliable life insurance company!

I am very surprised by this advice from an “expert”. A close personal friend of mine lost a child a year ago. Mr. Updegrave must be their financial advisor because they did not have any insurance on the child and did not have the money to bury her. Another reason to carry life insurance on a child is to cover lost wages on the parents. I don’t know about you but if I ever lost a child I don’t think I would be ready or even able to go back to work for quite some time. Life insurance on a child in excess of burial expenses can give the parents the option to grieve for as long as they need to without the added stress of having to go back to work right away.

My children are so important to me I couldn’t imagine going back to work for months should something happen to them. Maybe it’s just me but I’ve taken out enough term life insurance on them to allow me to grieve without causing a financial crisis.

YES, you do need life insurance for children. Do you know how much a funeral costs today? It can easily go over $10000 for a childs visitation, burial, and funeral costs. Do you want to finance this after the fact and take out a loan? I think not. A whole life insurance policy will build up value over time and it is also true they can buy more insurance even if they have a certain medical conditions after a certain point in time. My children won’t ever get to collect on these policies but their spouses or children later in their lives will when they die. Hopefully I will never need them but if something does happen, I know I won’t have to get financing. People need to quit spending so much on theirselves for their wants and take time to think about what they really need. It is not the big screen TV’s, granite counter tops, and the over the top SUV’s.

When my children were born I purchased single premium insurance good from 2 weeks of age till 22 birthday; with options on 22 second birthday to purchase standard premium policy regardless of health. These policies ran between $45.00 and $60.00 per thousand dollars. You could buy up to $5,000.00 for 22 years for $300.00. I was strugling at the time and worried about buriel cost. I was also wooried about their insurability at 22. These policies although never used I do not regreat buying.

To Mike in Houston, stop watching Suzy Orman with that buy term and invest the difference garbage. Has anyone that is against insurance ever heard of variable life insurance. Does anyone know about the tax benefits of loaning against the cash value in a policy in periods of high taxation? My guess is no and that your insurance agents aren’t doing a good job or shouldn’t be doing their job period.

Whole Life insurance is ALWAYS a gimic. ALWAYS.

First thing I would like to mention is that on average, the first 2-3 years of a Whole life insurance premium goes to paying agent comissions.

The amount of coverage you recieve with a Whole life plan is normally between $50,000-125,000. How many of you would be able to provide your children the same lifestyle with this coverage? With term you can achieve approximately 8x the coverage for less then half the premium.

Additionally, have any of you ever tried to take your “cash” from your policy? The fees are HORRENDOUS.

Now, as for the insurance for you children… Other then the guaranteed insurability, I can find no reason to tell my clients to invest.

That $5 you “invested” monthly for your child could just as easily be placed into a mutual fund. Given a market condition of 6%(which is an extremly weak market) this would mean that ever dollar you invest would double in 12 years (rule of 72). 24 years after each payment, that money would have quadrupled.

To Scott in Madison, WI. Thank you for your comment below. As an Insurance agent I couldn’t agree with you more!…..on both points

Wow! The insurance business must be really slow, in light of all the obvious posts by insurance salesmen. Let’s hear one of you admit what percentage of the premium for one of these policies goes into your pocket?? Any time I have been hit with a sales pitch for a “life insurance investment product” and asked this question, the presentation was over.

I have to agree with the respondent who pointed out that this is probably the worst answer to a question Updegrave has ever given. I think his remarks on the cost of insurance and profitability for a company are absolutely correct, but what about the cost of burial and expenses related to a young child dying? Most young parents don’t have excess cash of $5,000 to $10,000 to pay for such expenses, but could afford $10-$20 a month for a simple “baby policy”. We live in generation of spenders, so the ability of someone to pass a $10,000 liablity to an insurance company for a couple hundred dollars is what can make life insurance worth it. The other case of life insurance w/guaranteed increases can be needed as well. You’ll never know when that case will come up, but I have an epileptic sister who started having seizures at 21 and has the option to double her insurance at age 25 from our father’s baby policy he bought years ago. It’s a no brainer she take it. I’m not an advocate for “investment” insurance, but I strongly believe minor costs lost to cover an enourmous bill is necessary. I am assuming you don’t have home owner’s insurance b/c that would be a waste as well?

Take the money you would be investing in a Life policy and start a Roth IRA or increase you contributions to a Roth/savings plan. There is a reason Life Insurance is so cheap at a young age____The probability of such an occurrence is small. If it would sooth one’s mind to have a Life Insurance policy for a child, take out a Gerber policy at an inexpensive cost. Guilt can only take us so far….

Michael de Ayora Merced California

To all you wanna be CFP’s who are telling everyone that you don’t need permanent insurance, or mocking people who don’t have 5k or 10k in the bank,FIND A NEW CAREER. Obviously you have not looked at the economy, families are living week to week. Most people can’t just fork up 10k to 15k for the loss of a child. Think before you speak and remember COMMON SENSE CAN’T BE REPLACED WITH EDUCATION.

It’s true that one of the primary roles of life insurance is to replace income should the insured die prematurely during earning years. In this regard, a term life insurance can simply do the job. However, what a term life cannot do is to enforce systematic or disciplined long term savings. And a whole life or cash value policy can help achieve the goal of long term savings. Technically, there are many other practical or cost effective ways of accumulating cash, but in reality saving requires discipline and patience. Today, the savings ratio in America is below zero not because people don’t have anything to save or don’t want to save, but because they can’t save. With easy access to credit and their bank accounts, money market accounts or even stock accounts, Americans answer swiftly to advertising promotions and sales pitches of all kinds, spending on things that are often unnecessary or of less importance, thus quickly and easily draining their pool of cash reserves at hand. If such access can be restricted to a certain extent, then the savings ratio can be largely improved. Cash value in a life insurance policy can be accessed through loans in general, thus restricting the owner from spending the cash without a second thought. Plus, the concern over losing life insurance when the loan is not paid back is an added restriction on spending the cash in the life insurance policy, thus making it possible to realize the goal of long term saving/cash accumulation on tax-deferred basis. Currently, the law still protects the cash value in life insurance from creditors if the owner gets sued or for some other reason has to declare personal bancrupcy.

Having understood the discipline and patience for long term savings, for illustration purpose, a 1 year old female juvenile whole life policy of $500,000 would require annual premium of about $1,400 and over 65 years, the cash value can grow to over $800,000 assuming an average 6-7% annual dividend can be paid into the policy.And the total death benefit amount will also increase to nearly $2,000,000.

My uncle bought a Whole Life policy on his son as an infant. His son became totally and permanently disabled as a teenager. Every 3 years from age 21 to age 42, the son exercised an option to buy a Whole Life policy with the premiums waived on each policy. The premium on the original policy was waived also. Each of those new policies have cash value and dividends. These funds have supported his son who is now 52. Pretty bad investment, huh ?

I lost my 4 month son, 13 yr. old sister and 44 year old mother in a fire. That was something no one expected. Life insurance was a blessing. During your time of grieving, the last thing you want is the funeral home asking you “How are you paying, cash or check?”

Very touchy subject. Whole life insurance usually doesn’t work for kids. But it is all company specific. Typically the true whole life policies from mutual companies work great. Have someone illustrate an internal rate of return from one of those companies, you’ll be surprised.

To Dave, Palatine, IL.

Wow. It must be nice to have $10,000 or $15,000 in a bank account to spend on a funeral. However, most people do not have this money in the bank nor do they have the income to save this much money. Be realistic.

You need life insurance on your child in case he or she dies. The cost of the funeral, burial, and other “death” expenses could be very costly — even for a child.

I disagree with this advice for several reasons: 1.) Parents can get a child rider on their policy for a few dollars more per month and provide coverage for their children for up to $20k. Later when the child turns 18 that same policy can be converted for 5 times the face value or in this case $100k. 2.) Its important for a child to have coverage early because if they develop an illness during childhood that could make them uninsurable later in life. By establishing insurability early in life they can keep this policy forever.
3.) 50% of a life policy could be used for treatment of a life threatening disease at anytime … you don’t have to die to use life insurance! 4.) How many parents can afford $8k or more to bury their child?

There are many great values in buying a life insureance policy for your child

1- You can use it to help teach your child about finance and savings.
2- It is an untaxible retirement benefit. Who wouldn’t want 65 years of growth to borrow against in retirement. It give to your child long after you are gone TAX-FREE!
3- A death beneift if something were to happen
4-Once your child turns 18 you can give them the policy and let them make decisions. About the policy and how they want to use it in the future.
5-Once a value has been reached, you can stop paying into the policy and retain all the value and investment if you so shose.

To Dave in Palentine, IL - First, it is against the CFP(R) rules of conduct for you to suggest/represent that you have any sort of expertise or qualifications because you are a CFP(R) “student”. Only designees are able to display any representation of recognization by the CFP(R) Board.

Second, insurance is a hedge against the unknown and protects us from uncertainty. The mere fact you would make a blanket statement that suggesting child insurance is not necessary proves to me you do not listen to each client’s needs and address matters on an individual basis. You are to provide solutions to your client’s needs to help protect them from financial burdens, accumulate wealth, and create a distribution and exit strategy tailored specifically to them and based on their needs and personal beliefs.

Closed minded and blanket statements (along with false representations of qualifications - to a test you might never pass) are not what the CFP(R) stands by.

Wow, look at all the insurance agents chiming in. Anybody trumpeting “whole life” for its “cash value” care to say how much more commission they get for whole life than term (the good value for your client)?
An honest agent will advise a client to take the difference in premiums and invest it because you’ll end up with much more money so that you don’t need insurance when your term life policy ends.

My parents bought a small policy on me when I was young. The cash value allowed me to purchase my first home (down payment). I have since sold that house and bought two more. I now have over 150,000 in equity in my properties. Not a bad “investment.” The policy also allowed me to increase my coverage at specified dates. Thank God! I have developed a health condition that has left me uninsurable. I am a life insurance agent…and proud of it. Apparently, the “expert” has never handled a death claim. Two things a widow will never ask you is “What was the cost and what was the rate of return?”

What about the idea of getting life insurance early to insure a preferred rate in case you are diagnosed with a disease later on?

this site must be pretty popular with Insurance Salespeople! At least some disclose it!

Updegrave is 100% correct in his article.

Final expenses? please, if you can’t save a few thousand dollars, how would you have taken care of this child if he/she were still ALIVE?

The “insurability” argument is interesting, but I would check the math before deciding to go with kid’s insurance. If you pay insurance premiums since the child is 10 only to have 100k in benefits when he/she is 30-40, then it might be better to save that money in high yielding account.

Also, having child insured in order to be able to pay 10-15k funeral costs is a non-argument. You are supposed to have at least that much in emergency savings, regardless if you have sick children or not. If you don’t, then you have much more pressing financial problems than remote possibility of death of a child.

In response to Dave in Palatine, IL. Please do your own research. Children diagnosed with Type 1 diabetes are not always fat and fed poorly. I was told my daughter was genetically predisposed to be diabetic. The actual onset was prompted by an upper respiratory virus. Life must have been good for you. You know how to prevent childhood disease and you have no problem keeping an EXTRA 5/10K in the bank for unexpected death. Continued success and good luck.

I agree with Linda in Savannah. My daughter was diagnosed with Type I diabetes at 6. Thankfully, I had I already purchased a $10K life insurance policy for her as an infant. If not, it would be virtually impossible for her to do so as an adult. So while this is good advice from an investment standpoint, it’s not the best advice from a practical standpoint. Not everyone can afford to invest - some do good just to protect.

Ya Ya! We now you could invest the money else where and do better! And we know what are the chances you child won’t be insurable when they actually do need life insurance! But here’s the deal even a good one with a Guarunteed Purchase Option on it makes sense for the just in case their not insurable when they get to adulthood. IT’s CHeap! And if they are healthy as a horse as you assumed they would be they can surrender the policy for the small amount of Cash Value and dump it in their ROTH, and take out a huge term policy for preferred rates. ALL insurance is a RIP OFF untill you need it??!

This is a ridiculous arguement and I am surprised it was allowed in such a prestigious place. Life insurance can and does build wealth if funded properly. Being someone who knows people who are diagnosed with early forms of diabetes and other disease, protecting someones insurability at an early age is a must. You aren’t sinking money in anywhere you are investing it. I am very disappointed that an article like this makes blanket statements and doesn’t examine individual situations. Shame on you for having the ability to influence masses of people who are not educated on something like this and presenting them bad information and blanket statements

To at least half the people who have previously posted… Did you actually read the article or just the headline?

Updegrave’s point wasn’t that there is never, ever a need for life insurance on a child (e.g. funeral expenses, some “guaranteed” coverage). It was that life insurance makes a bad INVESTMENT. After the fees, cost of coverage, etc only a portion of the premium payments actually goes into the investment “bucket” and that’s usually in a very low risk investment that returns money market like returns. His point was you can do BETTER in an alternative investment.

And as for the guaranteed insurablity aspect… that too is a little disingenous. Unless you’re buying Junior a $100k policy, the Gerber policy is going to be a proverbial drop in the bucket when he actually needs coverage for income replacement.

Most term policies allow child riders that insure your children in the event of their death. The cost is neglibile and the financial security is well worth it.

When did the question ask one thing about insurance as a “investment”? It says build for her financial future. Insurance can be a building block. the biggest reason you have a policy on your kids is the financial toll it will take on your family. Ask yourself, Am i going to work tomorrow? Will we need any therapy? What will this do to my family? Ask anyone who has lost a child how easy the transition was financially. You don’t do this to profit from your childs death or as a college savings but you buy a policy on your child for financial stability for those left behind. Anyone who is self-employed should consider at least 1 years salary because that is likely what it will cost you in lost time and grief. the is the WORST thing i have ever read from Mr Updegrave. Too bad he will never be held accountable for this terrible advice.

I agree with your view on life insurance for children to a point - if the child ever develops a serious illness, especially cancer, he/she may never be able to get life insurance. A reputable company will guarantee that the child can purcase a larger policy at age 21 with no medical exam. It would be worthwhile in that case.

All I ever hear in the press are negative and misleading information about Life Insurance. For people who buy term in their 30’s it is inexpensive but the chances of them living for 30 plus years is a good one these days. Think about that money that you waisted and what it could have grown to had you not purchased term in the first place. There are pros and cons just like everything else. Yes, permanent is more expensive but you get your bang for your buck. It can be used for a retirement supplement, not a full retirement plan. The days where you could survive on pensions and Social Security are over. YOU have to create your own retirement with your advisor and determine your goals and objectives together. As far as a juvenile policy, I think it is excellent for a child to have, but for college planning, it should be only supplemented with an investement such as a 529 plan. You should be asking your advisor if they can help you find money your spending unknowingly or unneccesarily and use that money for your financial planning without decreasing your lifestyle, instead of asking…how much everything is going to cost. If your advisor is not helping you with that, then you need a new one.

There must be some insurance agents among the responses here as I am really suprised that anyone would think life insurance for a child is a good idea. Those policies are almost pure profit for the insurance companies and I am sure their actuarial charts bear me out. Term is the best deal for life insurance needs. Investment vehicles such as mutual funds are a far more efficient and effective way to invest.

Personally, I’m a total believer in Life Insurance, the more the better. Why? Because on several occaisions in my family people died unexpectantly. Thank God for insurance. Benefits are TAX FREE.
As for children, if you can lock in a low premium FOR LIFE with “Riders” by all means do so. Riders allow the insured to either add additional insurance at a later date REGARDLESS of physical condition or perhaps change to different types of insurance programs or add money to boost the policy etc etc. A good Agent can explain the differences and Riders only cost in most cases about a buck a month to add on per rider. As for investment? Where else can you invest money, let it grow TAX FREE (although not at stupid high rates)AND have the ability to access 90% of that money TAX FREE? Period.
The only statement that was mentioned in the article that I do agree with is that you do need to do your homework in putting together an insurance program that’s affordable and well structured. There are many types of insurance programs and don’t forget those riders, that can be very easily flexible as your life (or your child’s) changes over the course of time. The key is doing it early in life to get better prices.

I feel like Updegrave is basically talking down to a lot of us in his article! Unlike Walter, I can’t just go dive into my savings account and pull out a quick 10k needed for an unexpected funeral! My bad Walt, didn’t realize you were so well off! I’d say the small investment into a policy for my kids is well worth it for my peace of mind!

You are way off base. I have lost a child. Part of you dies when this happens. My income went from over $75,000 a year to about $15,000 a year. It takes years to work back to that level.Ninety percent of people who lose a child divorce as well - kiss 1/2 your net worth goodbye. The only thing that saved my financial life was having a life insurance policy on my child - which I received (tax free) when he died.

I was talked into a whole life policy at the age of 25 by being told it would convert to income at retirement should I want. I am now 68 and want to use it as income but the insurance agent keeps telling me not to. As it sits I don’t see what good it is doing me in my retirement and I need additional monthly income. What is the best way to go about getting the income out of my cash value? I also have two policies taken out on the kids in case of their death. They both have cash values also. Is there something I could do with this money such as covert to an annuity?

Mary I.

My wife is a Type 1 Diabetic who is uninsurable. When our daughter turned 6 months, we bought a $25K whole life policy with options to purchase $50K increments 9 times starting at age 21 without proving insurability. This is our gift to her so that she will never have to worry about loss of her income for her own husband and children if ever diagnosed with a disease that makes her uninsurable. It’s not about death benefit or investment (that’s what a 529 is for), but rather about her future peace of mind.

Really people, what are the chances of children getting sick and not being insurable - very slim. If you compare how many children who have developed diabetes (who weren’t fat or had a poor diet) to how many who were perfectly healthy by the age of 18 - the healthy would far outweigh the unhealthy.

You’re worried about funeral expenses - how disorganized are you if you can’t have $5/10k in the bank should something terrible happen. The “few bucks” a month would surely add up to more than the deatn benefit if invested properly.

As a studying CFP student (certified financial planner), I would ALMOST ALWAYS advise against having a life insurance policy on a child - it’s unnecessary. (Unless they do earn a large income for your family - but again, highly unlikely)

I must agree with Mr. Copeland below about the death of a child. My condolences to you Mr. Copeland. I too went through this when my 20 year old son did not survive a car accident. I had life insurance and even at $5000 it did not cover all the expenses related with his affairs and funeral. I can’t advise any particular person on what is best, but I can tell you that I wish I had a larger policy.

I very strongly disagree. I lost a child. She was ill for 16 years and there was a great deal my insurance did not cover. Had my agent done his job properly and gotten us into a program for her my financial loss would not have been as great. So…for what it is worth..I say get your child into a good program ASAP. Especially one which allows you to purchase additional insurance at later dates even if they are NOT insurable.

The average cost of a funeral and burial in the US in the year 2007 is between $8,000.00-$12,000.00. I don’t know too many families that have that ‘extra’ money sitting around. You are absolutely correct that life insurance is not an investment tool. If someone is looking for an investment they should look into investment products. However, I do not believe that $8.00 a month is a “lousy invesment” for a small life policy for children. Unless most families can fork out 10 grand on any given day, Juvenile Life policies a very wise tool that can help you avoid those financial set-backs. As we have seen in the last year a very high percentage of the American people can not even afford their $1200 mortgage payment, what makes you think they can afford to pay for a funeral and burial?

I currently work in the finance industry. Although their are some valuable points to this argument of Walter’s. Parents can be the owners of Life Insurance on their children. This