Reasons to buy life insurance for a child?
Reasons for buying life insurance for children vary. Some parents think it can serve as an investment to cover the child’s future expenses, some may deem it as an option to cover funeral expenses in case of the child’s death or other unexpected expenditures in the event of accidents, while others do so to ensure the insurability of their children in the future.
Types of Life Insurance for children:
When it comes to life insurance for children, there are mainly two common types, namely whole life insurance and term life insurance.
A whole life insurance provides life-long protection, which comes in two different forms of participating and nonparticipating policies. The premium of whole life policies is generally higher than that of term insurance and part of it is invested to build up cash value. As a result, early termination is likely to bring about losses.
A term life insurance provides coverage only for a limited number of years. Compared with whole life insurance, its premium is far lower and at the same time it is equipped with the same death benefit. Unlike whole life insurance, it has no cash value.
How much money should be saved for a child’s life insurance?
To be honest, there is no fixed amount of money that should be invested in the life insurance for children. Various factors may come into play when it comes to the exact number of the expenses. The amount of emergency savings, health insurance plan and other supplemental insurance plans as well as the financial situation of the family are all important conditions to be taken into consideration when you want to decide which life insurance policy works best for your kid and family. But do remember life insurance is essential in the event of unexpected incidents, so do not hesitate to buy some for your children despite the amount of money.