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  • Writer's pictureMark Roberts

Save the Children!

Kids are beautiful creatures. From the moment they are born, children are magnificent and wondrous. These tiny little boys and girls who come from their mothers' wombs are truly gifts from God. They are totally dependent on their parents, and can take even the toughest man or woman to their knees with their innocent charm from the first moment they take a breath. Childhood is to be celebrated. Your child needs you to provide food, shelter and most of all unconditional love. Additionally, they depend on you for their financial needs as they are growing up.

By law, a child is considered a juvenile until he or she reaches 18 years of age, then is legally a consenting adult. As a minor, they have significant needs, and it is up to you as a parent or guardian to help protect them. One of the most important aspects of protection is financial. Helping your child or grandchild to have a legacy of generational wealth can start very early in their life. In most cases you can start developing a plan as soon as that child is a month old.

Juvenile life insurance is a permanent policy purchased for a minor child, usually under the age of 18, by a parent, grandparent or guardian. These policies are a type of permanent life insurance that lasts for your child's lifetime and pays out a death benefit at any age as long as sufficient premiums are paid. Not only does this type of coverage help financially in several ways, but it also guarantees insurability.

Your child or grandchild will enjoy a lifetime of life insurance protection. Plus they'll have the right to buy more coverage as an adult at the standard adult rate, regardless of health or occupation, as long as premiums are paid. This type of plan builds cash value with each monthly payment to help create a nest egg for your child or grandchild's future. They can then borrow against it to help out with unexpected expenses, and as a loan there is no tax consequence.

Each time you make a monthly premium payment for your child’s plan, the insurance company sets aside a small amount of that money. Over time, this becomes the cash value of your policy. This money is available for you to borrow if you ever have the need for ready cash. As an adult, your child will have the option to turn in the policy and receive the available cash value. It grows over time just like your child or grandchild. It is a conservative investment that can, over time, supplement retirement income or become part of your child's overall financial portfolio.

As long as premiums are paid and the contract retains its value, juvenile life insurance guarantees coverage for life. That may not seem like a big deal when your child is young and healthy. However, as people age, life insurance generally becomes more expensive. In addition, those who have pre-existing conditions or get sick may find it more challenging to get coverage. Then if they do, their premiums are typically more costly. So, this type of policy can ensure your child will have some form of life insurance regardless of their health later in life.

The policy cost, usually very low, stays the same throughout the rest of your child's life. So, when they are 65 years old, the premium will be the same as it is right now while they're young. In addition, your child doesn't have to undergo any medical exams, as with many other types of coverage. Given that coverage is guaranteed as they age, they won't have to take any exams as they get older to keep this policy going.

Before you decide on any life insurance policy, it's important to look at all the factors—both the benefits and the potential limitations. Having all the information can help you make the best decision. Here are a few other things to keep in mind when deciding about juvenile life insurance:

  • Most life insurance companies offer a guaranteed purchase or a guaranteed increase rider to juvenile life insurance contracts. This allows your child to purchase additional coverage in the future without having to prove good health. This may be offered in the form of a new contract or an increase to an existing contract. Keep in mind that any additional coverage elected through this rider will require additional premiums.

  • Any loan taken out against the policy's cash value may not need to be paid back out of pocket, but the amount will be deducted from the death benefit.

  • You'll need to decide on this type of policy while your child is still very young, typically under 16 years old.

  • Permission must be given by the parent or guardian if someone else purchases the juvenile policy on the child. Typically, a grandparent wants to make sure their grandchild is protected and can afford to be the owner of the policy. However, the child's parent must approve the purchase in all cases.

  • Juvenile policies are only available if the parent(s) have life insurance.

Buying life insurance for a child is relatively quick and easy—especially when compared with buying a policy for an adult. You’ll have to fill out an application, but your child won’t have to go through a medical exam which insurers often require for adults. Unless the child has some significant healthcare issues, the underwriting is usually very fast with policy approval and issuance in as little as a few days.

The amount you pay also will be affected by the amount of coverage you buy and the age of the child. The younger they are, the less expensive it is. And it could be affected by the type of payment schedule you choose. For example, you may have the option to purchase a policy that is payable through the child’s age of 65 or 100. The further you stretch out the payment schedule, the lower the premium is, and the more affordable it is. Or, the insurer might offer the option to pay off a policy within a certain number of years rather than throughout the life of the child.

Before buying life insurance for a child, make sure you have enough coverage for yourself. Protecting the financial well-being of loved ones takes priority. In fact, insurers usually require that parents have their own life insurance policies with at least as much coverage as they want to buy for a child as a prerequisite for insuring a child.

Working with a financial planner can help you decide whether life insurance for your kids is a good fit for your family and your overall financial situation. Also consider working with an independent insurance broker who works with several insurance companies and can help you find the best policy at the best rate. I have several carriers with whom I am appointed and can offer several affordable options for coverage for juvenile policies. Contact me today for a personal illustration for your child or grandchild. Save your children from being uninsurable.

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