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Children's Life Insurance
When to Purchase Life Insurance for Children
Almost every life insurance company requires that any policyholder pass medical underwriting in order to qualify for a contract. This poses a dilemma for new parents as most of their offspring will outlive them, and the need for life insurance is not terribly clear. Consider some pros and cons to purchasing a contract covering your dependents.
- Advantages: lock in low premium rates, qualify before medical conditions are diagnosed, and build equity in cash value plans more quickly
- Disadvantages: dependents have no income to protect, and resources may have better uses today
Life Insurance Comparisons A key component is understanding the right life insurance option is comparing the features and benefits of the primary forms of coverage. Universal and whole are both cash value polices, while term provides coverage during a specified period of time. Fit the coverage to your family's needs.
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Purchase Child Life Policies When Most Affordable
Children life insurance can come in the form of cash value policies. The primary advantage of purchasing a cash value policy is the low rates, and rapid cash accumulation.
Purchase your cash value contract while your child is young and healthy. If healthy, the underwriting process will be simple and go smoothly. Because very young people are far from the day they may die, premium rates will be far more affordable compared to when purchased later on.
Cash value policies are designed as permanent coverage: you keep the policy until the day it pays a death benefit. Premium rates are designed to be either fixed or vary within a very narrow range. By purchasing a contract when your kids are young, you lock in low rates for the span of the contract.
Cash accumulation is a second advantage of a policy for children. The death benefit cost of the contract will be fairly low; meaning a greater percentage of the premium will go towards cash accumulation in the early years of the contract. This creates an asset that compounds interest, and they can borrow against or cash out when needs arise - like college expenses.
The two most common forms of cash value coverage are whole and universal life insurance.
Children with Existing Medical Conditions
Purchasing life insurance to cover your child with an existing medical condition can be very challenging. Insurance underwriting will often ask about medical history before issuing a policy. Parents are often motivated to get coverage before a medical condition worsens, or their child’s special needs highlight the importance of having a policy.
Kids with existing medical conditions may have a shorter than average expected existence. Below are some common childhood medical conditions that may make it challenging to find a contract.
Kids with existing medical conditions may have a shorter than average expected existence. Below are some common childhood medical conditions that may make it challenging to find a contract.
- Asthma – Eligibility depends upon severity of symptoms and response to treatments.
- Cancer – Eligibility may begin after cancer free for five years.
- Diabetes – Kids with juvenile type 1 diabetes may find coverage very elusive. See rider options below.
- Heart disease – Many with post-operative corrected heart conditions may be able to get a standard issue policy.
- Kidney disease – Chronic kidney conditions are difficult to treat, and often lead to dialysis or transplant. See rider options below.
- Sickle cell anemia – This inherited disorder can lead to infections, anemia, and damage to organs. Eligibility is based upon early detection and treatment.
Children with Developmental Disabilities
Children with developmental disabilities may have a second life insurance consideration. Even when healthy, they may not be able to support themselves once their parents pass away.
In addition to eligibility considerations, parents may also consider purchasing life insurance on their own lives to leave a legacy to their offspring with developmental disabilities. Parents should consult with a financial planner or lawyer qualified to establish a special needs insurance trust. Death benefits are paid into the trust to ensure their eligibility for government entitlements.
Co morbidity is a common issue for people with special needs. A child with developmental disabilities may not be able to care for him or herself, but in addition may have serious medical conditions at the same time. This can make finding an affordable policy very hard. Below are some of the more common developmental disabilities and some basic guidance.
In addition to eligibility considerations, parents may also consider purchasing life insurance on their own lives to leave a legacy to their offspring with developmental disabilities. Parents should consult with a financial planner or lawyer qualified to establish a special needs insurance trust. Death benefits are paid into the trust to ensure their eligibility for government entitlements.
Co morbidity is a common issue for people with special needs. A child with developmental disabilities may not be able to care for him or herself, but in addition may have serious medical conditions at the same time. This can make finding an affordable policy very hard. Below are some of the more common developmental disabilities and some basic guidance.
- Autism – Those with spectrum disorders are often perfectly healthy otherwise and may find they easily qualify. Autistic elopement is an erratic behavior that may pose an added hazard, so an accidental death and dismemberment policy may be a consideration.
- Cerebral palsy – Policies may be available via simplified issue application in small denominations at higher premium costs. Also see rider policies below.
- Cystic fibrosis – CF is a serious medical condition that may make getting a policy very hard. See rider policies below.
- Down’s syndrome – The life expectancy of someone with DS is twenty years shorter than average. Coverage may be available, but a corresponding higher than average cost.
Parental Life Insurance with Child Riders
If you have a child with special needs, an existing medical condition, or developmental disability life insurance with child riders may be your best option for two very important reasons: insuring the parent’s life may be most important, and riders allow for guarantee issue policies for your kids.
A parent of a sick or disabled child may have greater need for life insurance than the average family. These kids may be dependents for the remainder of their lives, and an endowment is an established way to provide for them throughout their lifetime.
Once the parents have set up a plan naming their dependents as beneficiaries, they have the option of purchasing a child term rider on their base policy. Term riders have several features that allow parents to purchase coverage when children are unable to qualify for an individual contract:
No medical underwriting. This means a policy will be issued automatically, provided either one or both parents meet eligibility requirements and are approved for coverage. All medical conditions are accepted.
Same premium cost for the entire family. Whether you have one child or ten, you pay one premium amount, making this a very affordable option for larger families.
Future offspring automatically included. As your family grows, your newborns will be covered as well at no additional cost.
Convert to cash value permanent policy. Each child can convert their term rider to a permanent cash value policy up to five times the face value, with no evidence of insurability. Conversion is available when they reach age twenty five, or when the primary insured parent reaches age sixty five.
A parent of a sick or disabled child may have greater need for life insurance than the average family. These kids may be dependents for the remainder of their lives, and an endowment is an established way to provide for them throughout their lifetime.
Once the parents have set up a plan naming their dependents as beneficiaries, they have the option of purchasing a child term rider on their base policy. Term riders have several features that allow parents to purchase coverage when children are unable to qualify for an individual contract:
No medical underwriting. This means a policy will be issued automatically, provided either one or both parents meet eligibility requirements and are approved for coverage. All medical conditions are accepted.
Same premium cost for the entire family. Whether you have one child or ten, you pay one premium amount, making this a very affordable option for larger families.
Future offspring automatically included. As your family grows, your newborns will be covered as well at no additional cost.
Convert to cash value permanent policy. Each child can convert their term rider to a permanent cash value policy up to five times the face value, with no evidence of insurability. Conversion is available when they reach age twenty five, or when the primary insured parent reaches age sixty five.
