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.