When is life insurance for children really necessary?
While a child’s risk of the death is minimal under most circumstances it is still true that in 2007, over 29,000 children died before they reached their second birthday and more than 10,000 more died before they turned 15.
The main purpose of life insurance is to cover the expenses of the surviving family members upon the death of the primary income earner. Since children do not have any dependents and are rarely the primary (or even secondary) wage earner, logic would dictate that their risk is low and that life insurance is unnecessary.
That is not to say that purchasing life insurance for children is always a bad idea; what if, for example, your child is earning a significant amount of income for your family as a model or an actor? This might be a circumstance were life insurance for a child is warranted.
Some people consider a life insurance policy for children as a gift or annuity endowment for that child as they grow older. This way they earn some interest, and have a life insurance policy in place that they can continue when they are adults, and may actually need it.
Other people think children’s life insurance policies are no longer a worthwhile product, in light of more effective tools like state or college operated 529 savings plans.
Your particular situation may have unique variables to consider and don’t forget that each state has a mix of options for college savings plans that may make them better or worse alternatives than a life insurance policy for your children if you are thinking about how to save for your child’s future.
Perhaps the best service you can provide your children as you plan for their college years is to know the advantages and disadvantages of each insurance and saving option and teach your children to take a long-term perspective of their finances.