Why Do Kids Need Life Insurance?

Mother Preparing for Child's FutureNew parents have to make a host of important decisions, including whether to buy life insurance for their children. This might not make sense to some. After all, do kids need life insurance? Not surprisingly, there are two sides to this argument.

As this Smart Money article from Oct. 13, 2003, points out, the pro-insurance side argues that parents won’t have to spend much to purchase a life insurance policy for young children; rates are low for newborns and toddlers. And by purchasing life insurance policies when children are healthy, parents guarantee that their sons and daughters will be protected by insurance even if serious illnesses strike them later in life, making them otherwise uninsurable. Finally, if parents insure their children with a whole life policy — as opposed to a term policy — children can cash out that policy once they become adults, using the money in it for important purchases.

Critics, though — as seen in this story by financial website Bankrate.com posted on Sept. 23, 2003 — argue that life insurance is designed to protect the income of the people in a family who earn the money. If these people should die, the life insurance policy provides financial protection for the rest of the family. Children, of course, are not bread winners. Taking out an insurance policy for them, then, does not fulfill the role that life insurance typically fills. Critics also say that it’s extremely rare for children to grow into young adults who are uninsurable. Most adults in their 20s or 30s are healthy enough to comfortably purchase life insurance on their own. They don’t have to rely on policies that their parents took out for them when they were children. Opponents also argue that whole life insurance policies don’t make good savings vehicles, either, as they often come with hidden fees. They recommend that parents choose other savings vehicle if they want to provide their children with some extra money once they reach adulthood.

So, do kids need life insurance? Even the critics agree that buying life insurance for their children may provide adults with some peace of mind. Whether that makes life insurance for children a sound investment, though, depends on each individual parent.

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