It is better to invest in equities or mutual funds for kids, than life insurance.
Do you advise life insurance for kids as young as two?
My wife and I got insurance already. My two kids likewise have educational plans. Do you advise that kids as young as two years old have life insurance?
Andy Ong
Answer
The essence of life insurance is being able to compensate for the income lost as a result of one’s demise. Proceeds of the life insurance is intended for the beneficiaries’ use so that they will be able to sustain their needs until a more permanent means of replacing the deceased’s lost income is found. Given this line of thought, availing of life insurance for a young child may not be a priority.
However, we do recognize that life insurance products have evolved to fit financial needs other than risk protection. Current life insurance policies serve as viable long-term savings and investment products. It is also general knowledge that premiums for life insurance policies generally are lower for younger ones; hence, if you see the need to set aside funds for your children’s future needs, like birthday celebrations or educational trips abroad, you may as well consider getting these plans at a more affordable rate by identifying your children as the insured party.
As added advice, though, put in a rider that will waive future premiums should the policy’s payer become totally and permanently disabled or pass away so that in case this eventuality happens, the policy will remain in force and the kid will still be able to use the policy’s benefits. Assign a guardian as well so that this person can transact business with the insurance company if the child is still a minor when this particular scenario happens.
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