It’s never easy to think about buying life insurance policies for your children. Facing the harsh realities of life, especially when your precious family is concerned, is uncomfortable and, frankly, depressing.
But what if we told you that there are reasons for your children to have life insurance policies, and that those reasons had to do with the creation of financial benefits your children could enjoy throughout their lives. Would that change how you think about buying this important policy?
Think in Terms of Premiums
Life insurance premiums are based on the health, age, weight and height of the person applying for the policy. As your children age, it will get increasingly expensive for them to buy insurance—even if their health is perfect. When you invest in a life insurance policy for your young children, you lock them into a low premium that they can enjoy for the rest of their lives, as long as the policy premiums remain paid and it doesn’t lapse.
This premium advantage can be useful when your children grow into adults and parents themselves, and the presence of a policy means that your children’s children won’t need to worry about being left without any financial means after the unexpected death of their parent.
Buying a life insurance policy for your child can create a positive effect not only on their future budget but also on the lives of your future grandchildren.
Create Cash Values
Whole life policies accumulate cash values that create equity for the policyholder. These cash values can be borrowed against to create tax-free loan proceeds and can be received if the policy is surrendered (which may be a taxable event). Allowing this cash to accumulate in an insurance policy also creates a tax-deferred environment for growth that does not include a restrictive environment for the spending of the loan proceeds, like a Coverdell or 529 plan might.
The cash values in whole life policies have several ways of growing, which means they can accommodate many different risk tolerance levels. For a more conservative growth, you can look at a fixed rate policy. For more aggressive or risky growth, you can look at variable and indexed policies that have subaccounts with underlying investments that can go up or down with the market.
This accumulation of cash and growth gives your child access to a fund that they can use to help pay for college expenses, make a down payment on a home, buy a car, and so on. This gives them a huge financial advantage, saving them interest (the interest on cash value loans is paid back to the policyholder) and freeing them from the burden of loans that are placed on so many young people trying to get a head start on life.
We all know that at any time, the unthinkable is possible. A life insurance policy has the burden of being the one type of policy that is ultimately useful when only the unimaginable, the loss of a loved one, occurs. But that doesn’t mean its only use has to be one associated with a time of loss and grieving. When you buy your child a life insurance policy, you don’t have to focus on the morbid possibility of loss. Instead, you can focus on helping the bright and happy future of your child be more financially stable and hold even more exciting options for growth.
For information about Thousand Oaks life insurance, give Corbett & Associates Insurance Agency a call at 877-569-3799.