From: elise@ticipa.pac.sc.ti.com (Elise Wade)
Newsgroups: misc.kids
Subject: Re: Insurance for Kids (was Re: When did you feel "grown-up")
Date: 16 Oct 92 14:59:02 GMT
Organization: Texas Instruments

In article <cepOXiy00iUxE1P3Fb@andrew.cmu.edu> Laura McGinnis <lm3a+@andrew.cmu.edu> writes:
>On 09-Oct-92 in Re: When did you feel "grow..
>user Paula Burch@cmb.bcm.tmc. writes:
>>... But, I'm curious--why would an infant need to have 
>>life insurance? Am I skipping doing something I ought to?
>
>I though my answer to Paula's question might be of general interest:
>
>The policies we have on our kids do a couple of things:
>
>If, God forbid, they should die, the money would be there to cover
>funeral expenses.  I helped my sister bury her husband & was appalled by
>the costs involved.  Rather than think/worry about it, at least we know
>the money is there to do what might need to be done.

Well, funerals can cost about $5000 dollars.  Certainly less than
say a car.  If the tragic happens, and you don't have that kind
of cash reserve, you'ld probably be better off financially
borrowing the $$.  I've seen some children's insurance policies
that make 18% interest loans on a credit card look like a good
deal!!

>
>If, God forbid, they should become uninsurable later in life (e.g. heart
>disease, severe diabetes, etc), these policies cannot be terminated by
>the insurance company.  I don't know if the level can be increased, but
>at least there will be something if it's needed.  My father (62 yrs old)
>has heart disease & has not been able to get what he considers an
>adequate level of insurance because of his health condition.

The odds of a child becoming uninsurable is very small.  Further,
you'ld probably be better off putting the premium $$ in an intermediate
bond fund or balanced fund.

>
>If, God willing, all goes well, the policies can be cashed in for
>education or even used later as retirement benefits.  60 years of
>premiums REALLY adds up!  And, after a certain time (10 years, 15? I
>don't remember the details that clearly), the dividends issued on the
>policy become sufficient to cover the annual premium, so there's not
>much financial burden to do this.
>

Again, don't think that child's insurance will porvide a particularly
good investment tool.  In nearly all cases, you'ld be better off
simply saving the premium $$.  Insurance policies do differ and
comarisons can be tricky.  But if you cannot understand what the
return on your investment is from the presentation (assuming you've
got an honest salesman) you probably aren't getting a very good 
deal.

(The reason you are fuzzy on when the premiums will be covered
by the cash value return is probably because that is sort of
a "fuzzy" deal.  I'll bet it will take a lot longer that the
salesman promised -- he probably used unrealistically optimistic
data to project that little item.)

I used to be an actuary & actually worked developing various products
and evaluating their value/risk to the insurance company.  Without
exception whole-life policies sold to minors were the most profitable
profit line the company (and salesman) had.  In fact, these policies
were *so* profitable, I'd generally feel raunchy for days after
the annual accounting reports were completed.  

Sorry Paula, but you've probably been ripped off.  I'd recommend 
(if the $$ are signifigant to you) that you go to an independent 
financial advisor.  Some one who has the expertise can explain the actual
return on investment, your risks and safe (usually higher yield)
alternatives.

Elise.
From: janem@hpfcdc.fc.hp.com (Jane Marcus)
Date: Thu, 15 Oct 1992 20:45:50 GMT
Subject: Re: Victims of Bullies
Organization: HP Fort Collins, Co.