There are opinions on both sides as to whether buying life insurance for children or grandchildren is a good idea or an appropriate financial investment.

Here are four reasons to consider in making your decision.

      1.  Building cash value. By purchasing a whole life insurance policy, the policy accumulates cash value over time.  The cash value can be used for college tuition, a down payment on a car or house or used in an emergency. Yes, you receive the same result if you open an investment account but there is something about building cash value inside a life insurance policy that is different. First of all, the cash value is exempt from creditors which a bank account is not. Second, you are required to pay for the policy each year when the premium notice arrives. There is a psychological difference in being required to write a check for a life insurance premium that is not the same as making a voluntary deposit  into a bank account.

  1.  Cost. The premium on a children’s life insurance policy is based on the child’s age.  The premium will not increase unless you want to buy more insurance.
  1.  Guaranteed insurability.

Most of our clients don’t want to think of using the life insurance policy for a death benefit.  Instead, we suggest focusing on insurability.

Purchasing a “kiddie insurance policy” from certain companies provides an added benefit of an option to purchase additional insurance at a much later date.

By purchasing a children’s life insurance policy, you can protect the child’s ability to buy more life insurance in the future should something happen that would cause a policy to be unaffordable or even unavailable due to illness or disease.  Even though age is a factor in the cost of future insurance, health changes won’t interfere in obtaining additional insurance where none would be otherwise obtainable or not obtainable at all.

  1. Generational Wealth Transfer.

Grandparents certainly love their grandchildren.  Purchasing a life insurance policy for a grandchild can provide a significant benefit many years into the future. While a grandparent may not be around to see the benefit, the time-value of money will provide a significant compounded gift to a beloved grandchild.

If you are a parent or grandparent and are thinking about alternative ways to save money for your children or grandchildren, we suggest that you consider purchasing a whole life policy on the lives of your child or grandchild.   Please call us at 214.727.6000 to set up a time to discuss this important opportunity