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| Consider the "Living Benefits" of Permanent Life Insurance For a Child |
The thought of losing a child is obviously a nightmare beyond words. That said, parents should act like the responsible adults they are, and educate themselves on permanent life insurance for their children. Aside from a death benefit that everyone associates with a life insurance contract, there are financial benefits for your child even if he or she lives to a very old age.
There are two popular arguments against life coverage for children.
First, because no one wants to dwell on the demise of a child many parents immediately put up a wall of rejection at the notion of purchasing life insurance on their children. It's easy to understand why parents want to avoid even thinking about such a tragedy, but rather than dismissing the idea out of hand consider the "living benefits" that many permanent life insurance policies offer.In addition, some financial pundits teach that life insurance should not be purchased on children since they do not contribute financially to the household, and thus the death of a child would not result in a financial burden to the family. This of course is a ridiculous statement. In the unfortunate event of a child dying, these pundits would have us believe that on top of the incredible emotional strain involved, the parents will easily be able to pay the $10,000 to $15,000 that a funeral and burial costs.
Let's look at some benefits to a person whose parent(s) had the foresight to purchase a permanent life policy when he or she was young.
The premiums never increase. Thus the policy holder will continue to pay the same low childhood rates as when the policy went into effect - regardless of age or declining health. When the child becomes an adult the contract can be transferred from the parent to the child with no increase in premiums. An elderly man with multiple health problems would therefore be paying the same life insurance rates as when he was a young healthy boy.
Some insurance companies offer a "guaranteed insurability" option that allows the policyholder to purchase additional life insurance when he or she reaches a certain age or when a defined live event occurs such as getting married or graduating from college. This can be a huge benefit because the company must issue the increased death benefit coverage regardless of the health of the policyholder.
Permanent life contracts build cash value in addition to providing a death benefit. The cash value of a policy can be borrowed against for such things as a college education, a down payment on a house, funding retirement, or anything else for that matter. Or if you choose to cancel the policy outright the insurance company will send you a check for the amount of cash value accumulated as of the date of cancellation.
Some contracts offer a "reduced paid up" option which allows a policyholder to cancel the policy, and then based on a formula considering the premiums paid up to the point of cancellation, the insurance company will issue a policy with a certain death benefit that is reduced from the original face amount. Let's say for example a person buys a contract with a $15,000 death benefit, pays the premiums for a few years, then decides to cancel the policy and take advantage of the "reduced paid up" option. The insurance company will then issue a policy with a face amount of say, $4,000. The good news here is that the policyholder has a $4,000 life insurance policy and she never has to make another premium payment.
There are many variations of permanent life insurance contracts and the options available and a description of each is beyond the scope of this article. This type of insurance should never be purchased online unless a person has a good understanding of what they are buying. Talk to a local insurance advisor who can explain your options in more detail and answer any questions you may have.