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Child life insurance comes in several forms and is used to insure the life of a child. It may also be used to help a child who develops a medical condition in childhood to obtain life insurance at a later point, though this varies with the policy. There are many claims about child life insurance and it’s important to understand the different types.
Some insurance companies claim that child life insurance protects your child’s future. This really depends on the policy. Some policies are whole life insurance, which means that a child would be able to continue to get insurance from that company when he reaches a certain age, usually at age 18. This isn’t the case of all child life insurance.
Some insurance companies sell term life insurance, which does not guarantee future ability to be insured. Moreover at the expiration of this insurance, you have nothing to show for it. The main point of having child life insurance of this type is to insure that you will be able to pay for a funeral and perhaps defray costs of losing work or needing therapeutic help if your child dies. Some term life insurance may also pay out if your child becomes seriously disabled during the term.
Term life usually means you can’t borrow against or cash out the policy, and it’s often offered for less money than is whole life insurance. Some parents feel that what they would really need in the awful event where a child died is financial help to pay for a funeral and perhaps to be able to take time off work. Since the payments for this type of insurance are fairly low, it may be a good investment.
There is some benefit to child life insurance that is whole life insurance especially if you have known medical or genetic conditions that might manifest later in childhood and make it very hard for your child to obtain life insurance as an adult. Since this type of insurance is usually purchased for very young children, it could give them some assurance of being able to get insurance later, and they may be able to borrow against the policy to do things like go to school.
Most parents do not want to prepare for a child’s death, and instead want to prepare for the happy and successful lives they want their kids to have. Child life insurance may play on parents’ fears about what would occur if they lose children. Some financial experts recommend that it doesn’t make sense to purchase this insurance and it makes much more sense to start a savings account for children. You can invest the same amount or little more than you would pay in insurance premiums and these can be used without restriction when needed later, hopefully to help a child with college expenses.