So, you have recently had your new baby and are now wondering whether it is a good idea to take out a life insurance policy on him/her? Perhaps your insurance agent has been suggesting it. What you may find out may come as quite a surprise.
We have all seen the ads on TV featuring a pitch of insuring your small child. Gerber Life is one that most all of us have seen at one time or another. They advertise that coverage is guaranteed for life and the premiums are extremely low.
These policies are sold as whole life policies and are designed to give your child a built up amount of cash value which they can borrow from in the future if they need to. And while no parent wants to deprive their son or daughter from having a financial head start in their life, are these policies the best way of doing just that?
Before you rush out to send the company your first premium payment on that new policy, stop to consider whether your child actually needs a life insurance policy. The purpose of having a life insurance policy is to provide the family a source of financial income in the unfortunate event the head of the household passes away. This allows the family to continue living life as normal as possible without the steep financial burdens. But do infants require such coverage?
Individuals in their 20’s have very little problems in obtaining a life insurance policy. Today, even people with heart problems, diabetes, or other health related issues can have a life policy written for them. Yes, it may cost more than a standard life policy, but you can get coverage.
Next, consider the amount of coverage an infant life insurance policy provides. In most all cases the face value of the policy will be either $5,000 or $10,000. That is not going to be a good investment over the many years of paying premiums. The fact is $10,000 does not go very far today, let alone 20 years from now.
When you really stop to think about it, buying a children’s life insurance policy isn’t worth the benefits you would get from it. What is your best course of action? You may want to set up an educational IRA that you could fund with the premiums you would pay on a life insurance policy. Later on you could buy a term life policy when coverage becomes necessary. The funds you put into the IRA could be tax deductible, providing you even more of a financial benefit.
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