Life Insurance on kids? A different perspective.
July 16, 2007
We get life insurance to protect our family in case something happens to the money-maker. Apologies to the working moms, but for the sake of this post, I’m going politically incorrect and consider that fathers are the main breadwinners.
A dad wants to protect his family, so he should always insure himself. The policy value and type will vary depending on his needs. Personally, I have a 30 years term with $1 million policy value. I know that if anything happens to me, my family won’t have to worry about the mortgage and my kid’s tuition; and this peace of mind costs me $89 per month. So, dads, be financially responsible and insure yourselves.
Should the mother be insured? Most people would agree that if she works and helps bringing food to the table, then she should be insured as well. However, even if she doesn’t work, I still think moms should get a life insurance. Just because she doesn’t work, doesn’t mean she doesn’t have financial value. I’m not going to go into that debate of calculating her value again. Even if she’s a stay at home mom, imagine the cost of a child care or a baby sitter to take care of your young ones if anything would happen to her. So be safe and setup a life insurance on both parents.
But what about life insurance on the kids? They don’t have income and don’t help bringing food to the table, so why would we insure them? It would be a personal tragedy if something would happen to our kids, but it wouldn’t be a financial tragedy. Doesn’t make any financial sense, right?
Well…
Insurance on kids are the least common ones. Bankrate says that only 15 of kids under 18 are currently insured and that those policies are generally for small amounts ($5k).
Insurance companies have some arguments to get it, like making sure the kid will be insured in the event he gets an illness that prevents him from being insured in the future. If your family has a history of health problems (diabetes, heart disease, etc) that might prevent your kid from getting insurance when he’s older, then it might make sense to get him a life insurance.
I’m actually going to disagree with them. Science is continually making progress, and it would be a better use of the money to invest it and help our kids when they need it instead of purchasing a life insurance that he might not need. With proper eating habits and science’s help, there’s a good chance he’ll grow up to be a healthy adult.
CNNMoney writes why insuring kids is a mistake.
However, most people, as well as most articles I’ve read often ignore this one perspective: that we should get a life insurance on kids, not to protect them, but to protect the rest of the family.
I wrote on another post about the pain of losing a child. I’ll be sad when my parents pass away, but I know I’ll be back on my feet in a few weeks. However, if something ever happened to my kid, I’ll have no idea how I’ll cope with that. Right now, just the idea of losing him makes me feel helpless and breathless, so it is possible that I would be so psychologically devastated that I wouldn’t be able to work for a long period of time after his death. It is an important fact that is often ignored, but the fact is, we’re better prepared for our parents’ death than for our kid’s death. Like I mentioned in my other post, we sadly wait for the moment when we’ll bury our dads, but burying our kids is something unthinkable to us. It’s against nature’s law.
Will I be able to work? Probably not. But for how long? How will that affect my job? Will my boss/company allow me to be away for as long as I need? Even if they do, how am I going to feed my family? Like earthquakes, tornadoes and floods, this is something that we really can’t plan for, and for families that don’t have a decent cushion (emergency funds), it might make sense to consider insuring their kids.
We insure our biggest financial asset, which is our house, so why not insure the thing we love the most in this life: our kids.
I haven’t made up my mind yet on whether to insure my kids. Would you do it?
Posted in Finances
SUBSCRIBE
Archives
Blogroll
Popular Posts
Site Admin
content rss
August 6th, 2007 at 12:03 pm
[...] Journey 2 Retirement takes a look at life insurance on kids. Children don’t make money, so why take out a policy for them? Here’s an interesting argument for making this step. [...]
August 6th, 2007 at 12:50 pm
But you only get the money if your kid dies, and how are you going to feel everytime you spend the “blood money”. will it remind you of your loss. This is my reason for NOT insuring my kids. Instead I invest the money I’d use and could live (briefly) off of that.
August 6th, 2007 at 6:00 pm
[...] Journey2Retirement really gave me something to think about with his post on why he has life insurance on his child. It’s an unconventional thought and while I’m not completely convinced, he makes an excellent point. [...]
August 6th, 2007 at 6:57 pm
Journey,
Great Post! I have never been to your blog before, but you can bet I will be back!
I insure both of my children for $100,000 each. The policies also have guaranteed insurablilty riders for an additional $900,000. I figure if they were to lose their insurability, at least $1,000,000 of insurance would be available to them, but I only purchased $100,000. I pay the basic premium, and Grandma & Grandpa put in a few bucks every month. At the level we are fundning it, the policies should no longer require additional premiums by the tiome the kids are in lower elemementary school. Basically, I purchased the insurance with the expectation that my children will live long productive lives, and will be the ones to bury their father. Not vice-versa.
But I too have also thought “What If?”. I can not imagine the emotions of losing a child and think I would be a wreck. But I am also self employed and if I do not work, I have no income. Ryan, if I were to collect a benefit, it would not be blood money. It would be income replacement while my family and I properly grieve.
August 7th, 2007 at 1:19 am
Eh, I don’t know anyone whose job would give them an extended period of time off that the emergency fund couldn’t cover (more than a month or two), even in a situation as awful as that. I know mine sure wouldn’t.
Maybe this theoretical scenario is that losing a child would force you to quit your job to mourn. In my field at least, this is career suicide. What good is that in the long-term, even if you have the money to do it?
August 7th, 2007 at 3:14 pm
Vicki,
The question goes back to: Will you be able to work a few weeks after your child’s death? If not, and if you don’t have enough money saved up, how are you going to support your other kids.
I agree that each case is unique. Each job, employer is unique. This is more of a “what if” post.
August 8th, 2007 at 3:07 am
Interesting points. I weighed the financial aspects of this not too long ago and concluded that it doesn’t make sense. And I think a part of me would feel like insuring my kids would be equivalent to a jinx.