What are the reasons for life insurance on children?
- Thread starter NHB_MMA
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- 9,744
Any kind of permanent life insurance on children is generally a waste of money.
I know, I know..."it guarantees their insurability". What are the chances (statistically, that is) that a young child will become "uninsurable"? Check it out - it's miniscule.
Cash value for college, etc.?
Check out what an equivalent amount invested in a solid mutual fund returns versus the cash value - not even close!
Now I'm not anti-lifeinsurance - as a matter of fact far from it! If you need burial expenses and a fund to get you through the grieving, it's better accomplished, financially that is, through a dirt cheap rider on your own life insurance policy.
If you have small children, use the dollars to insurance yourself - they need the money much more if you're not around, than you do if they're not around.
I know, I know..."it guarantees their insurability". What are the chances (statistically, that is) that a young child will become "uninsurable"? Check it out - it's miniscule.
Cash value for college, etc.?
Check out what an equivalent amount invested in a solid mutual fund returns versus the cash value - not even close!
Now I'm not anti-lifeinsurance - as a matter of fact far from it! If you need burial expenses and a fund to get you through the grieving, it's better accomplished, financially that is, through a dirt cheap rider on your own life insurance policy.
If you have small children, use the dollars to insurance yourself - they need the money much more if you're not around, than you do if they're not around.
- Staff
- #53
Thats what I write on my clients that want and believe in life insurance on their kids....the last one was a couple of moths ago....2 yr old....$50,000 wl guardian....about $55 a month locked for life.....
- 9,744
Great, let's analyze this...
If you're concerned about burial expenses/grieving fund, you can purchase a kiddie rider on your own policy for what - $5.00 a month?
That leaves you $50/month to invest. At college time (16 years) at 8% average annual return, you have $19,489.53.
What's the cash value?
- Staff
- #55
- Staff
- #56
- Staff
- #57
well while Paul tries to get his head out of termville ...the reason is that they will eventually turn the policy over to their kids as a gift when they eventually get married because they get life insurance and want to pass the importance of it to their kids......I have had several grandparents do this for their grandkids also....so the next time you are trying to shove something down someones throat because you believe its the best deal in your eyes you might want to talk to your client and let them tell you what they want......
- 7,790
Excellent advice, STI. Give the client what they want to buy, not what you want to sell them!
- 2,152
Invest in what? 8%, is that tax free? Is it tax free when given to the child? Does it have a DB that will last as long as the life of the child?
- 9,744
Invest in quality, large cap growth funds. Many have returned an average of 14% annually over the last 20 years. Two examples would be Longleaf Partners, and Fidelity's Contrafund.
So 8% shouldn't be that hard...
Taxable or no, it BLOWS AWAY any cash value in a permanent insurance policy - so that doesn't make any difference.
Death benefit that will last the life of the child? What's the point? Shouldn't you buy enough insurance to replace your income if you have dependents? What kind of income does $50,000 in db replace?
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