Cash Value Policy for Grandchild

[f55c6]

I'm considering a life policy to build cash value for my 6 year old grandson that can someday be given as an unexpected gift. Any thoughts on whole life vs. VUL., vs. indexed? My main goal would be to build cash value and not death benefit, but also allow for him to increase the death benefit as life changes. We live in CA.

 

[pfg1]

I think they are great. I would go with either a max funded mutual WL, or max funded IUL. Either will do very well long term, imo. WL has the guarantees, IUL has the higher potential upside. I'm not a fan of VUL personally. A properly designed WL can deliver mid 5's on the IRR long term. Pretty darn good with no risk.

 

[Botoman]

I think they're awesome especially if there is family medical history for conditions that might have the child be rated or un-insurable when they become of age to apply. Having a GIR is key to children's policies.

 

[Botoman]

I would look at a limited pay WL with a company that has a great dividend track record. I would also look at "overfunding" but it can sometimes be complicated.

 

[LGilmore]

Depends on what you want to spend. You could go 100k life coverage and add a guaranteed insurance offer, or something similar. Basically what a GIO rider does is give your grandchild the opportunity to purchase additional coverage through life without underwriting. This could be the best part of your doing this. You would be taking away an insurance company's ability to say NO. That is a bigger deal than many think.

 

[marc82much]

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[f55c6]

Depends on what you want to spend. You could go 100k life coverage and add a guaranteed insurance offer, or something similar. Basically what a GIO rider does is give your grandchild the opportunity to purchase additional coverage through life without underwriting. This could be the best part of your doing this. You would be taking away an insurance company's ability to say NO. That is a bigger deal than many think.

Thank you. Does a GIO add significantly to the cost of the policy?

 

[Life Hawk]

Depends on what you want to spend. You could go 100k life coverage and add a guaranteed insurance offer, or something similar. Basically what a GIO rider does is give your grandchild the opportunity to purchase additional coverage through life without underwriting. This could be the best part of your doing this. You would be taking away an insurance company's ability to say NO. That is a bigger deal than many think.

If you go a well funded type of whole life product, I would not add GIO, But add more coverage that will increase cash value later. Riders are paid for before dollars can bare interest. Most folks - though not all - should be able to access more coverage in the future on term coverage, which is much less in cost and generally has a limited life.

Rule of thumb - agents make higher commissions on whole life products.

 

[Justin Bilyj]

I would go 10 or 20 pay whole life for Mass who has solid dividend history. When they turn 18, they can re-qualify and get preferred rates (if possible), because child policies are at standard rating automatically. At that time I would 1035 the policy into the new policy, structured in a way that wouldn't make it a MEC. Have waiver of premium on both policies.

 

[LGilmore]

Thank you. Does a GIO add significantly to the cost of the policy?

Not usually, it's relatively cheap. Think of it as a stock option. Depending on the company it will allow up to 9 times to use it or lose it. Starting in their 20's most will offer every three years or so into the 40's. Or when they get married or have children.

While you can tell from some of the posts, it's not for everybody. Agents should talk about it with their clients when the insured is young. While it doesn't happen to everybody, in-insurability happens to enough of them. Same with wavier of premium. Something to think about. Personally I like tying up the hands of an insurer where they can't weasel their way out.

It's why some here don't understand whole life, even though they are agents. Any time in the insurance business and you learn that when insurers give up control, they charge for it. The cheapest stuff, the insured has little to no control. I don't do debates anymore on this stuff.. I explain it and if you want it fine, if you don't as long as I explained it, that's fine too. 30 years in and I'm too old to fix stupid, even when it's from other agents.