Is life insurance for toddlers necessary?

I am being hounded to get my toddler life insurance before it goes up.

Asked by Sara

4 Answers

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Answered by Dave Bradley, Investment Manager (Financial Advisor) in North Charleston, SC
Hi Sara,

Do the toddlers have any income or any debts to pay? Keep in mind that some toddlers may be part of a trust- in this case speak with your estate attorney/executor and/or give us a call to dive deeper into this.

There are 2 ways to value life insurance. There is no way to put a value on a life.
1. Loss of $$ due to death of the primary earner (lost earnings calculation)
2. Lump sum value to pay off all debts in case of loss ( debt value calculation)

You can contact us directly for more information or even refer the ones "hounding" you to contact us no obligation.

Hope this helps.

| 04.08.16 @ 00:53
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 18:48
Answered by Larry Gilmore, Insurance Agent in Marysville, WA
I purchased life insurance on both my kids a long time ago. Here's why, first off the cost is nominal and if you add guaranteed future increases to the plan, you've basically set them up to never be told "no" by the insurance company if they want to increase their coverage. Why is this important? If they get "sick" or fall into abusive behavior, they are basically done purchasing insurance before they really get started. Childhood diabetes used to be a straight NO, now it depends on the health of the applicant. The future rider takes away health as an issue. Substance abuse is an issue. This also is a NO that is taken away. Life insurance on a child is looking ahead at possibilities and providing some protection from those things if they were to happen.

The other thing which is the hard side of this question is what happens if a child dies? Where does the money come from for a service? Where does the money come for a headstone? Where does the money come from to cover for the loss of time at work? If something terrible were to happen, does not being able to afford things come into play? Would you want them to? Would you want to tell your spouse "no, we can't afford that headstone."?

My kids are adults now and thank god I never had to use their death benefits. I am passing those childhood policies onto them soon (when they marry) as help with the foundation of their financial plan. | 04.12.16 @ 20:00
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 18:48
Sara, here is an approach that may deserve your attention. One reason that you may be hesitating on the policy is that you are looking at traditional "adult centered" needs like income replacement, or the somewhat off-putting thought of a death benefit. Focus for a moment on the part of a life insurance policy that is not a death benefit. The part I am referring to is the cash value component. They say that we are never as young or as healthy as we are right now. They also say that one of the best inventions in the history of mankind is compound interest! Here's the view from here: a very young and healthy person has a lifetime of cash accrual in front of them, and a life insurance policy with the focus on developing tax deferred cash (which the parent, as owner, controls) can be one of the best ideas ever. Imagine your toddler as a 25 year old, with as much life insurance as will ever be needed, at the cost of what a newborn's policy will be, fixed forever. Imagine that same 25 year old with 30-50 thousand dollars in equity in the policy. As universal life, the face amount can be increased later, when your toddler becomes a mom or a dad, with a house and other things, like what you have. How many other parents will have picked up the idea and acted on it? We know that many don't - but wish they had.

The point is this; focusing on the parts of life insurance that work for you will gain you some things that you can't find anywhere else, and the time to set it in motion is when children are young, the cost is low, and the passage of time will increase the cash value beyond what you may imagine.

Kirby
Term.com
LifeInsuranceToday. US | 04.12.16 @ 23:19
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 18:48
Answered by Dave Bradley, Investment Manager (Financial Advisor) in North Charleston, SC
Let's do some fact checking on Cash value life insurance for toddlers. Since our Insurance marketers neglected to frame the $30K-50K in cash value, Let's dig deeper into this:

Here is some math for you: This is in addition to premiums, $200/month ($2400/yr) paid directly into the cash portion gives you around $51K after 18 years of payments. Keep in mind that the MEC regulations apply and there are many other restrictions on how much you can take out.

From an Investment management perspective. This same $200/month could become $182K after 18 years of payments. You could set this up as a 529 plan or however you need it.
https://www.irs.gov/uac/529-Plans:-Questions-and-Answers

There are also some PPLI plans that are great for key employees and Estate planning. They also have restrictions. | 04.13.16 @ 01:15
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 18:48
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