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The idea of buying life insurance for my kids seems creepy. Why do people do this?

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  Answers  |  1

October 04, 2017

There are several reasons. One of the best reasons focuses not on the component of life insurance that is the death benefit, but on the component of cash accumulation. Permanent policies develop cash value. They take advantage of the “time value of money” which suggests that compound interest, over a long period of time, produces a pile of cash.
Are you thinking “cost of higher education” yet? Once we are adults, we can no longer get back those early years. Coverage like this costs more as we get older, too. Some parents recognize the power of life insurance as way to get a huge advantage in place for themselves and their young ones at the earliest time possible.

Imagine if your parents started a policy like this when you were a newborn. When you are age 30, they assign it to you. You have permanent coverage set at a newborn’s cost basis. You also have an ever increasing “cash account” that you may access just as adult life is beginning to whisper things in your ear, like “buy that house”, “buy that car”, or “pay off the
remaining student loan debt”, or any of the other things that come with adult life. When you hear those things whispered in your ear, you can access the cash and make some of those things happen. Parents can take advantages of life insurance as a cash accumulation tool and set all of that in motion.

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