And 4 Tips on How It Works… When our kids were little, we purchased life insurance policies for each of them. While it wasn’t a purchase that held a lot of meaning to our kids at the time, for my husband and I it was part of a long-term plan to establish good financial roots as we prepared for their future. Purchasing permanent life insurance on children isn’t new, but if you’re unfamiliar with the concept, here’s how it works:
You purchase life insurance on the life of your child – because of their younger age, the premium is very affordable.
You pay the premiums as your child grows up, and the cash value of the policy grows 1.
Some policies come with a rider that allows you to purchase additional insurance coverage at specific dates throughout your child’s life. We opted for a whole life policy with this option. It meant that during option periods we could purchase additional coverage with no additional underwriting 2.
Once your child becomes an adult, you can transfer the ownership of the policy to your child.
Our kids are now responsible, thriving adults, and we made the decision to transfer the ownership of their policies to them this year. They will own their policies, pay the premiums and make decisions about who to name as their beneficiaries. But that’s just the mechanics of the process. In actuality, our family has grown over the past couple of years, and the life insurance policies that we’ve been funding over the years will now protect our children’s families, including our grandchildren. We’re giving our children the peace of mind that comes from protecting their families. We’re giving them an asset with cash value that they can tap into if they need to 3. We’re giving them a head start on a strong financial foundation. And because they understand the importance of life insurance now, we’ve introduced them to our agent – who is now their agent – so they can continue building on their financial foundation and carry on the legacy that we created for our family. Interested in speaking with someone about your child’s future in a similar way? Have a financial professional contact you.
Depending on the type of permanent life insurance policy and the level of funding, there is a potential for cash value to grow. You can learn more about the types of life insurance here.
Riders are optional, may be available at additional cost, and may not be available in all states or on all products.
The use of cash value life insurance to provide a resource for emergencies or accumulation goals assumes that there is first a need for the death benefit protection. The ability of a life insurance contract to accumulate sufficient cash value to help meet accumulation foals will be dependent upon the amount of extra premium paid into the policy, and the performance of the policy, and is not guaranteed. Policy loans and withdrawals reduce the policy’s cash value and death benefit and may result in a taxable event. Surrender charges may reduce the policy’s cash value in early years.