Is Getting Life Insurance for your Children Prudent or Prudish?
At some point in your parenting adventure, you may be introduced to the concept of getting life insurance for your children. There are a number of reasons why you might want to insure the life of your child, and about as many other reasons not to. Here is an analysis:
Reasons You Might Want to Insure Your Child
- Getting permanent insurance for them while they are young is cheap, and guarantees their insurability for life (as long as they never cancel the policy), despite potential medical complications that arise over time. For more information on permanent insurance policies for children, check out this resource.
- Getting temporary (term) insurance also provides a guarantee of insurability until your child reaches their 60s or 70s, however at each term renewal (typically 10 years), the price will increase dramatically. There is no benefit to staying with a Term policy at renewal if your child is in good health, and in fact – common practice dictates that applying for a new Term policy altogether at renewal is usually cheaper than renewing.
- You may want to provide some financial protection for yourself should your child die unexpectedly prior to reaching the age of maturity. There will be a cost to arranging for funerals and such, and depending on the situation, there may also be exorbitant medical bills to contend with.
Although I believe in insurance, I also believe it is possible to have too much (and the wrong kind of) insurance. Life insurance for a child is very inexpensive. But before wantonly buying any insurance policy, ask yourself the following questions:
- What sort of financial duress would I experience if my child dies?
- What would the immediate expenses be?
- What would the longer-term expenses be?
- If I am not medically insured, what would the cost be if my child has a terminal illness?
- If the situation above exists, how would I cover these medical expenses if my child lives?
I believe you will find that upon consideration, the only financial duress you would experience if you lost your child would take the form of:
- funeral and burial expenses
- lost wages due to emotional trauma
The medical expenses would ideally be covered off with separate medical insurance, since an illness we live through can be just as expensive – if not more so – than a terminal illness. So I think it is safe to assume that getting life insurance for your child as an alternative to medical insurance is unwise.
However, you may also notice that other financial burdens would be lifted. You would no longer have to cover school and clothing expenses, extra curricular activities, or save for post-secondary education.
As callous as it sounds, kids are expensive. Rarely will parents lose money when they lose a child. So if your primary motivation for getting insurance for your child is to protect your own finances, I would like to suggest that losing a child – as emotionally traumatic as it may be – may not be as financially crippling as you might think.
However if you want to get life insurance for your children to provide them with a nest egg, or a guarantee of inexpensive insurability as they age, then considering a permanent policy in the name of your child might be an investment.
You are the parent. It’s all up to you.