New Parent? Here’s the Best Way to Protect Their Future

New Parent? Here's the Best Way to Protect Their Future

When it comes to financial planning, there are two primary issues will affect children directly.

  1. Do you need to buy life insurance separately for your children?
  2. What type of policies would protect their interests?

Life insurance often sets off lots of debate over the value of coverage. That said, talking about insurance is an excellent conversation to have since it involves both family and estate planning. Are you a new parent? Here’s the best way to protect their futures.

New Parent? Here's the Best Way to Protect Their Future
Child Whole Life Insurance

This type of coverage extends for the lifetime of the person covered from childhood into adulthood. It locks in a rate as well which will not fluctuate regardless of lifestyle or medical history changes. This policy works best for the individual needs of the children unlike parental coverage that includes additional dependent protections.

Childhood whole life insurance is more expensive than parental insurance with a rider clause as there is a cash value attached as coverage matures. Insurance agencies typically offer lower benefits as well. Only about two in ten adults purchase this type of plan.

A benefit is the ability to cash in the policy to pay for necessary expenditures like college, a down payment on a home, or financial obligations. It can also be an excellent way to use the cash to transfer and build a stock portfolio to continue investments.

Child Rider Clauses On Parent’s Term Life Policy

A rider is an addendum to a policy that covers specific clauses. It can be for anything including asset protection or for a new addition to the family. Unlike the whole life policy, this coverage has age restrictions, and it has a limited value amount.  

You typically will not have to add a rider for each child as one addendum covers all the dependents in your home. Your primary policy has the most protection and risk. It is why the rider will be an affordable option for multiple children between 15 days and 22 years.

When choosing a rider, you will buy increments called units which start at one thousand. Each unit expense adds to your yearly premium amount due. The risk is low for insurance companies, so typical rates tend to be between five and seven dollars per unit.

There Are Five Reasons To Choose These Options

Many parents weigh the value of an individual’s coverage or a family policy where each person has specific protection. In this case, it depends on your needs as well as the reasons why you intend to buy the insurance policy. For parents, it might be well worth the value of a family policy, but for grandparents, it might produce a financial benefit solely meant for the child.

1. It Protects Your Child’s Interests From The Unknown

When it comes to life and death, anything can and does happen. While you will not be able to prevent an unfortunate health diagnosis or death, you can protect your family from unplanned medical bills, your earning potential during a crisis, and from disasters.

2. You Lock In Cheaper Rates

The longer you wait to purchase beneficiary or life insurance coverage, the higher the risk will be which will prompt insurers to charge more for premiums. As you can lock in your rate with term life insurance, you should think about buying your policy when prices are at their lowest. If you wait until a health issue occurs, you will lack the option to ensure protections are in place. Medical conditions also increase your premiums as well.

3. It Protects Your Children’s Quality Of Life

Parents work hard to provide for children by meeting needs both financially and emotionally. When a death occurs of a parent, children are at risk of suffering from either of these issues. When you leave in place financial security, the other parent has resources to meet the needs of the children including physical and mental health well-being.

4. Protects Children From Insurability Issues

Did you know that whole life insurers cannot cancel policies except for non-payment? This type of plan enables parents or grandparents to purchase cheaper coverage that will run the lifetime of the child. No matter what occurs, the policy protects the interests of the child. It is also a long-term investment which makes sense economically.

5. Eases Funeral Cost And Economic Burdens

Do you have ten thousand on hand to pay for burial services? Do you know how grief will affect your family’s well-being? Parents need time to grieve which means you may suffer economic losses after time off from work. Whether it is you or a dependent’s plan, insurance guarantees short-term needs like daily living expenses will get paid on time.

Does A Child's Life Insurance Policy Have a Cash Value?

Like most whole like policies, coverage for children has a savings component that enables you to provide a guaranteed benefit payout. It is a primary reason why you often see advertising focused more on parents and grandparents since it comes with an investment strategy that will benefit dependents later in life regardless of what parental policies yield.

If will be of significant value to speak to a financial advisor before making any decisions that involve your children. You must consider your economic condition and debts. Do you already have enough coverage to care for your child’s needs through your insurance plan? Looking at the advantages and disadvantages helps you become more keenly aware of your resources and needs.

Leave a comment