Why would you buy a life insurance policy on your kid?
Why would anyone do this; it’s morbid, Isn’t it bad advice. Isn’t it simply wasting money?
Is it, really?
Personally, I am the product of parents who bought life insurance on me; so, is my wife. Those two life insurance policies provided us with the next egg to purchase our first home. The money wasn’t locked in a trust or an education fund or a retirement account baring us from homeownership. Instead, these two small mutual whole life insurance policies propelled us into the homeownership economy and then because of additional policies we purchased along the way, propelled us into real estate investment properties.
A quality mutual whole life insurance policy can be a major financial piece for a young person while providing protection of the child for the parent.
On the sad side - if your child were to die unexpectedly, you receive a death benefit. This allows you to take the time to mourn, away from the pressures of your job and not having to worry about going back to work immediately. I know of one local employer who provides just a day of grieving time if you were to lose a spouse or a child; one day and then back to work. If you had the financial resources provided to you at exactly the right time, wouldn’t you want to have a different option? During my career, there have been two separate occasions that a child policy played out that way. It wasn’t part of the plan and yet, it was.
Now, let’s look at the positive; on the financially building piece for your kids - WOW!
Think about it - this can be used as an educational piece, a place of guaranteed savings, a building block for when they’re out on their own.
How prepared do you think your child would be for the real world if you taught them about bills and loans using a simple whole life insurance policy as a foundation?
At the age of eighteen, you could start having your child pay their own premiums learning what a bill is and how they could pay it each month and how that payment builds over time. You could teach them how to use it as a tool instead to hoping and praying money set aside might provide freedom some forty years into the future. That’s a long time to wait. I’m not saying I don’t like retirement plans, but isn’t there a lot of living that should be going on, during those forty years; that’s why it’s called Life Insurance. It’s a product that can be designed to help you live your life, today.
What about showing them how a policy loan works? At sixteen, they could have enough values to buy their own car in cash and you could set up a policy loan to help them learn about loans without being penalized by a bank if they mess up along the way. That can happen, right?
The cash inside a mutual whole life insurance policy is boring, secure, guaranteed and accessible. It’s the perfect foundation to allow you to take on the riskier things in life like uncertainties of stocks, mutual funds, retirement accounts which might not be accessed for decades into the future.
So, why would you buy a life insurance policy on your kid? Simply to kick-start their future with a known outcome, backed by a written contract.
