10 Things Life Insurance Agents Won’t Tell You: Thing #3

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Posted Sep 21

Thing #3. Your child doesn’t really need life insurance- Daniel Goldstein

Those of you who know me won’t be surprised that I agree with this “Thing”.  Other than as required by legal arrangements, nobody “needs” life insurance any more than they “need” a sports car.  Life insurance is a luxury, a luxury many of us prefer to have.  So for a child, especially, there is no “need” for life insurance.
So why do my peers and I often recommend coverage for kids?  To name just a few reasons:

  • It is, in fact, a great investment.  The best equity indexed universal life (EIUL) policies now have uncapped indexing options.  Of course you give up some gains in the form of a spread or participation rate but over the long term that is well worth the advantage of missing out on all losing years.  Combined with no caps on contributions & tax-free access, I know of no other way to replicate these benefits.  What a great head start for a kid.
  • Long Term Planning-  Someday your kid will be an adult with a family.  If you have lousy genes or poor family health history, let your kid arrive at adulthood with a fully funded, increasing life insurance policy.  Life insurance seems invaluable when you are no longer able to qualify for it.
  • Estate planning-  If you think you’ll have a taxable estate, why not gift premiums to an EIUL?  They will reduce your taxable estate, and, pass tax-free to your beneficiary/owners.

As far as “profiting” from your child’s death, I also find that idea repugnant.  But a small policy we had on my daughter allowed us to contribute to a medical foundation in her name after she died.  That really helped us through.