Should I Get Insurance For My Child?
By: Derek Condon
Tags: Financial Planning, Money, Insurance, Finance, Family

The way I try to view everything financial is by looking at what I wish I already knew. If I knew what I now know 10 years ago, I believe my life would look very different. I would have a lot more money invested, I would have a rental property or two, I wouldn’t have spent money on some things, and I would invested more time and energy into different areas than I have. I might even be approaching early retirement! I try to be the person I wish I had guiding me back then.

One area that’s constantly overlooked when it comes to financial planning is the insurance side of it, or how we protect our plans. Getting Life Insurance in place kind of sucks for most people due to a couple of reasons: 1 — having to pay for it, and 2 — going through the medical questions or testing.

Other than that, insurance is great. It helps protect you and your family if anything bad happens (because bad things do happen) and offers you peace of mind. We all know that we need insurance, but having to pay for it is usually a big downside. But there could be an easier way for the next generation. A way to ensure your loved ones don’t have to worry about the same things you’ve had to.

It’s called a Whole Life Insurance Policy. As the name suggests, it is intended to cover you for your entire life, so there are no term options. But because it is meant to cover someone for their entire life, it tends to be more expensive since the benefit is guaranteed to be paid out (as long as you pay your premiums). But, if you get it for a child, it can actually be quite cheap. Here are some of my favourite things about getting life insurance for a youngster.

Pay in as little as 10 years

As I mentioned, whole life insurance is meant to cover someone for life, but it doesn’t mean you have to pay it for life.

Insurance companies are basically investment companies. They look at someone and determine how likely they are to pass away unexpectedly, then figure out how much money they need to bring it to make it financially viable for them to insurance someone. Remember, insurance companies, after all, are businesses.

Because of our good friend compound interest, you can pay more money sooner and have it work for you, essentially replacing monthly premiums down the road. A lot of policies have the option to pay our dues over 10 years, 20 years, or over a lifetime. Generally, the shorter the term, the more the premiums, but the less you pay over a lifetime.

The benefit is you could put insurance in place for a child and have it completely paid up before they are an adult. So they never have to pay for insurance unless they need more of it. At the very least, it can provide a great foundation. Thus them avoiding having to pay for it.

Combines insurance and investing

Some insurance policies will have different options for how much you can pay each month. There always is the minimum premium payment you have to pay to keep the policy in force. On top of that, you can pay up to a certain amount into an investment account within the policy.

This amount grows over time through investment growth and with additional contributions. The neat thing about this is this investment portion can either increase the life insurance benefit (original benefit + investment amount), or the person who is insured can borrow out of the investment account if they need to.

Say they need money for school, a house, a business, or whatever it might be. Instead of borrowing at a high-interest rate from a bank and creating debt, they can borrow against their insurance policy. It’s a neat way to gain some financial independence when it comes to big life decisions.

Future health conditions don’t matter

My favourite part about getting insurance for a child is the fact that they are getting insurance in place. We all know that health implications happen over a lifetime, and it isn’t just saved until the end years. Negative health implications can make someone uninsurable or very expensive to insure. Getting insurance in place early means they are always going to have an option to have insurance in the future. Maybe they don’t need the insurance right now, but they will someday. Getting insurance also means you have the insurance of getting insurance later.

Getting insurance in place early takes all of the unknowns away. We all want what is best for our children, our nieces or nephews, so I believe getting insurance in place for a young loved one is a great idea. Contributing early can help ensure the funds get the most growth so they can go the furthest. And it just lets there be one less thing to worry about down the road.