Should you take out Life Insurance for your children?

According to Investopedia, “Life insurance is a contract between an insurer and a policyholder in which the insurer guarantees payment of a death benefit to named beneficiaries upon the death of the insured. The insurance company promises a death benefit in consideration of the payment of premium by the insured.”

Life insurance is often mistaken as an insurance type that is specifically geared towards adults and not for children, as adults are at a higher risk of death and would leave behind more dependents. Therefore, they would make greater use of such a policy. Some may even argue that a life insurance policy for a child is a waste of resources and is not necessary due to their young age and lack of breadwinner status. Furthermore, the policy is seen as impractical for children as no one is financially dependent on them.

This, however, just represents one benefit that your child can enjoy should they have a life insurance policy taken out for them at a young age. We at Guardian Group have taken the liberty of listing 5 reasons why you should take out a life insurance policy for your child/children starting today:

1. Protect your child’s insurability: Having a life insurance policy taken out for your children while they are young gives them insurability later on in life, regardless of their future health. By having a policy taken out early, should your child develop health problems later on in life, they would have already been covered under a sturdy life insurance policy that was taken out at a low premium as it was done both early, and before health problems arose.

Whether hereditary diseases or lifestyle diseases, the life insurance taken out today is an investment that will provide your children with all the coverage they need and more, 40 years in the future.

2. Cheaper premium rates are locked-in: Investing in a life insurance policy for your child means that cheaper premium rates are locked-in early. As children are not perceived as high-risk to insurance providers, particularly if they are healthy with no illnesses, their premiums start at very low costs. This means that as a parent or the person paying the premium, you would have saved money in the long-run by locking in a cheaper premium rate today.

The earlier the life insurance policy is taken out for your children, the cheaper the premiums would be, therefore remaining affordable to you in the years to come.

3. Funeral Expenses are covered: Something no parent wants to think about. Funerals are expensive. To the average income earner, it could mean dipping into crucial life savings, or incurring large debts by borrowing or taking loans. An added benefit of life insurance policies is that they cover the costs of all funeral expenses in the event of a tragedy, leaving you with the peace of mind knowing that you are financially protected for the future.

4. Can be used as a cash-back savings fund: Life insurance policies are essentially cash-back savings funds as they can be cashed out at any given time. Should you take out a policy for your children, this can be cashed out at any time to provide access to cash that your children can use should they encounter financial emergencies or otherwise.

While it is not advisable that life insurance policies be cashed-out due to loss of coverage and benefits, the option is still available for you to choose should that need arise.

5. Collateral for loans: Not only can a life insurance policy be used as a cash-back savings fund by your child, but it can also act as collateral for them should they decide to apply for a loan in the future. By the time your child has grown up, their life insurance policy would have matured to the stage that allows them to use it as collateral when applying for loans for various things, such as purchasing their first car, putting themselves through college or even financing their wedding. Banks recognize life insurance policies as assets and therefore treat these policies as they would treat any other form of collateral.

These are 5 Reasons why you should take out a life insurance policy for your child/children today and we hope that you enjoyed this week’s read. We at Guardian Group wish you a Happy and Safe Easter Weekend, and we look forward to you joining us for next week’s blog addition.

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