When the name life insurance comes up, most people think that it is only for adults, working professionals, or individuals over the age of 20. But a common deal they are ignoring is the increasing demand for whole life insurance for kids. While it may feel unconventional, now many parents are moving towards this option, making an exceptionally smart move.
The insurance plans are meant to protect the financial wellbeing of the policy holders. And for peace of mind, planning and making proactive decisions in life in very important.
What is Whole Life Insurance for Kids?
Whole life insurance is a permanent life insurance policy that gives future security to the child for which this plan is purchased. In contrast with the term life insurance, this insurance policy provides life security for the entire life or till the premiums are paid. The main aim of this policy is to ensure a safely livelihood to parents and their children.
The key components of a child’s whole life insurance policy include:
- Lifelong coverage
- Fixed premiums
- Guaranteed cash value accumulation
- Option to borrow against the policy
Whole life insurance purchased for the children is buyed and managed by the parents, guardian, or grand parents then after they can transfer it to the kids after they became adult or self-dependent. For a long-term financial planning parents need to promote this kind of practises.
Benefits of Whole Life Insurance for Kids
Whole life insurance consists of many benefits that provide a reason for parents to buy the policy for their kids. Let’s look at some significant benefits of whole life insurance:
Lifetime Coverage at a Low Cost: The most special benefit is that purchasing a life insurance policy early for children provides low premiums for the rest of their lives because children have the highest life expectancy rate.
Guaranteed Insurability: This is also a good point, as most of the development and illness start from an early age. So, if any illness develops at this age can make it difficult to purchase any insurance policy in the future.
Cash Value Accumulation: Whole life insurance facilitates cash value accumulation, meaning the money you paid in the form of premiums is being saved and, in the future, if needed, then borrowing can be done from the saved money.
Financial Education: The act of purchasing insurance for their kids at an early age promotes awareness and importance of using these smart tools in life to the kids when they are grown.
Flexible Financial Tool: It is a flexible tool that ensures the best optimal protection throughout life.
Is Whole Life Insurance Policy for Kids Worth It?
This is one of the most common questions asked by parents, but this depends on your financial needs and long-term goals.
- Reasons it worths
- Your child will lock in fixed premiums throughout their life.
- Early actions can prevent your child from getting denied from the insurance application due to any chronic illness or past family health history.
- Long-term savings and cash value feature.
- You value the idea of legacy building and estate management for a long-term goal.
- Reasons it might not be worth it
- You’re seeking high returns in less time; whole life insurance provides slow and steady growth.
- You have a low income and want term insurance policies for a shorter period.
- You don’t anticipate needing to guarantee your child’s future insurability.
Buying or not buying any type of insurance policy highly depends on your long-term goals.
Cost of Whole Life Insurance for Children
The cost cannot be determined easily because it depends on the age, coverage amount, insurance provider, and optional riders. The expected cost ranges between $5-$25 for kids of age below 14. However, with increasing age the rate ofmonthly premiums increase due to reduction in life expectancy.
| Age | Coverage | Estimated Monthly Premium |
| 0–5 | $25,000 | $10–$15 |
| 6–10 | $25,000 | $12–$18 |
| 11–14 | $25,000 | $15–$22 |
These premiums are completely estimated based on various sources, so please consult an expert insurance advisor before taking any action. Also, the whole life insurance provides a low coverage amount, which is a major disadvantage of this life insurance plan.
Working of Whole Life Insurance for Kids
- Parents purchase a whole life insurance policy for their child.
- The premiums start from the date of policy activation. Parents are responsible for paying the premiums till the child becomes an adult.
- As time passes, the cash value accumulated in the policy account.
- When the child matures or becomes an adult, the policy can be transferred to continue the old policy.
- The policy cash value can be used in education, travel, college, and other expenses of the child.
- With time, the lifetime protection continues till the passing of the policyholder.
Disadvantages of Whole Life Insurance for Kids
Despite having many advantages of whole life insurance for children. There are some disadvantages present which need to be considered.
- Return of Investment: Many people takes whole life insurance as a investment options. However, as compared to potential investment options like stocks, mutual funds, etc. the return in this plan is low.
- Total Cost: Sometimes the cost paid for decades seems low as compared to the insurance offerings.
- Constant Premiums: The premiums need to be paid constantly without any flexibility which may increase the financial burden.
- Policy Loan: It is possible to have a loan on the cash value accumulated. But the funds are low and the loan is also low with high interest rates usually.
Whole life insurance plan offers many benefits and comes with some concerns also. So, before making any decision consider all the majors and make decision that best fit with your requirements.
Best Whole Life Insurance Providers
| Company | Highlights | Min. Coverage | Approx. Monthly Cost |
| Gerber Life | Grow-Up® Plan, coverage doubles at 18 | $10,000 | $8–$15 |
| Mutual of Omaha | Strong cash value growth, no exam | $5,000 | $9–$14 |
| Foresters Financial | Dividends + member perks | $10,000 | $10–$18 |
| State Farm | Convertible policies, flexible riders | $25,000 | $13–$20 |
| Globe Life | $1 starting premium | $5,000 | Varies after first month |
These are top insurers, but many other insurance companies are present in the market that provide insurance to kids.
Conclusion
Whole life insurance for kids is a smart and useful tool that can be used by parents to secure the future of their children. Also, in the case where the kid dies due to any severe illness or reason, the beneficiary may get a coverage amount that helps in stabilizing the financial imbalance.
With this wise decision, an understanding of the uses of financial tools will develop in the kids, and they will become motivated to always move securely and think about the future. Whole life insurance provides a feature of cash value by which also makes it a good way to save money for the future.
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Frequently Asked Questions
Is buying whole life insurance for a child worth it?
Yes, buying a whole life insurance policy is worth more than just coverage. It provides financial awareness and peace of mind. And also with this parents can secure the future of their kids without paying high prices.
What type of insurance is best for kids?
Due to the early age, the policyholders get low monthly premiums, and with that, it is best to buy a permanent or long-term insurance policy. So, whole life insurance can be a good choice as children have highest life expectancy which helps them in getting some addtional advantages like low premiums, addons, etc.
Can I cash out my child’s life insurance policy?
Yes, unlike term life insurance, whole life insurance provides the feature of cash value, so that it becomes easy to cash out the saved money.
Should I buy term or whole life?
It depends on you because if you want long-term or permanent protection support, then you need a whole life insurance that lasts till death. But if your requirements are for the short term, then term life insurance is the best choice.
