Monday, September 13, 2010

Should We Take Out Life Insurance Policies on Our Kids?

Should We Take Out Life Insurance Policies on Our Kids?

Okay, this is going to be one of those discussions where I ask you to completely ignore your emotions for a moment, while I present the two sides to this argument. As the father of a fashion-crazed sixth-grade daughter (please wish me luck!) and one who would have an expanded family soon (your prayers, please!), you can be sure that I have my own opinions, but I am taking my own advice here and leaving my emotions OUT of this conversation.

Absolutely Not!!

This school of thought argues that to buy coverage on children amounts to parents/guardians trying to profit upon the tragic and unlikely demise of their children. And, since these children don’t provide any income toward the upkeep of their families, there is no financial loss to replace, should the unthinkable happen. Besides, even the thought that you believe your kid might die is simply preposterous. What kind of parent would you be if you let something happen to your child?!

Absolutely Yes!!

These folks, on the other hand, argue that, our kids do die. And since we don’t know “how” (not “when”) that will happen, it is prudent to insure their lives. There are numerous stories of families who have lost children to horrible illnesses, only after racking up huge financial obligations, some resulting in home foreclosures and myriad other financial troubles that could have been assuaged – at least to some extent – by a life insurance check.

I remember, years ago, being a branch manager at a top broker-dealer/insurance agency and having to write a letter confirming that a family would be receiving a death benefit check for the passing of their child in a horrible accident before the funeral home would feel comfortable “taking care” of their deceased child. I also remember another instance where the child of one of my colleagues was diagnosed with a deadly cancer and eventually passed away. The family used up all of their financial resources to care for their gravely sick child, even missing work without pay. After all was said and done, the death benefit check they received came in very handy and saved them from what could have become a spiraling financial nightmare – following the already incredibly tragic loss. Please note that I am simply sharing these real-life stories by way of information – I am NOT saying I support those who make this argument.

Some also argue that maximum-funded insurance policies are a great way to build cash values that can later be accessed to fund a child’s college education. In this case, the primary goal of max-funding is cash accumulation; the minimum death benefit is an incidental extra.

I told you earlier that this was going to be a very charged discussion. But as I always say, if you have kept the emotions at bay long enough to gather the facts, you can then make the best decisions for your family.
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  1. I see both points but I tend to side with the "absolutely yes" I mean it is just in case. not having seems more dangerous if something bad happens. these days they even sell them right at the hospitals- with Gerber and the others.

  2. Buying insurance on your kids to me, should be part of a person's overall comprehensive finacial plan. Children, just as adults, die.

    Even though the primary purpose of buying life insurance is to replace income in the event of life changing event, which includes the death of a child, children, just like adults, should also be covered even though they may not have an income. If a child passes away unexpectedly, the parent's income will be impacted due to all the associated expenses. It's all about responsibility, which should not be limited, and in the case of buying insurance, should include children as well, since no one can predict any thing.

  3. All my children are now adults but if I were to pick a side it would probably be the yes. I do understand the no arguments also. Thanks Samuel for a great article as always.

  4. nice work Mr. Asare in presenting both sides to this debate.


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