As parents, it is only natural to want the best for your kids, afterall, you love them unconditionally. However, we often overlook the need for child life insurance because we prioritize other aspects of our kids’ lives.
If you’ve decided to insure your kids, you’ve made an excellent choice! Especially because it can lock in low rates and act as a means of investment for your kids. However, there are some important details you need to consider before proceeding with this life-changing process. But first, what is child life insurance and how does it work?
What Is Child Life Insurance?
Child life insurance refers to the type of life insurance policy typically bought by a parent (or grandparents). This type of insurance policy offers full coverage for the child’s life as long as the premiums are paid. For child life insurance, the amount paid as coverage is typically low and premiums are locked in, thus saving you costs in the long run.
When your child reaches a certain age, typically 18 or 21, he/she can take ownership of the insurance policy and choose to either buy more, continue coverage, or cancel the policy.
What Are The Benefits Of Child Life Insurance?
Of course, insuring your kids comes with several advantages. Let's explore some of these benefits:
- Insuring your kids guarantees future insurability, meaning your child (or children) can buy more coverage without needing to undergo a medical exam.
- Child life insurance acts as a sort of investment for your kids, allowing you to borrow money against the cash value account or withdraw money from it.
- When your child becomes an adult, he or she can stop the policy and receive the money in full.
- It covers the funds required in cases of emergency.
What Are The Important Details To Consider Before Buying Life Insurance For Your Kids?
As I mentioned earlier, certain important details must be put into consideration before insuring your kids. The next sections discuss some of these factors.
Consider Your Budget
This is, perhaps, one of the most important details to consider before insuring your kid. You need to decide on the type of insurance cover your kids need, and most importantly, if you can afford this type of insurance. Remember that the cost of insurance coverage also includes any other fees required as well as the premiums. So, you need to be sure that you are financially up for it. Your financial capacity will ultimately determine how much or the type of insurance policy you purchase for your kids.
Consider The Type Of Cover Your Kid(s) May Need
There are various options of life insurance cover to choose from. These include:
- total and permanent disablement cover,
- death cover,
- trauma cover, etc.
As such, it is important to consider which type you want for your kids before making the purchase.
Weigh the Options
Before purchasing any type or amount of insurance policy for your kid(s), be sure that you have weighed your options and chosen which works best for you. Typically, there are two types of insurance premiums, these are level premiums and stepped premiums.
Level premiums are typically higher than stepped premiums at first but do not increase as your child grows. However, stepped premiums increase as your children grow older, so they become more expensive over time. Consider which option is more affordable for you and works best for your child(ren) before buying any insurance policy for him or her. You also want to ensure that you are purchasing the product from an insurer you can trust. Any of these companies are a great place to start exploring life insurance policy for your kids.
Evaluate The Policy Terms And Conditions
Never (ever) rush to purchase a child life insurance policy from any company without first critically evaluating the life insurance policy terms and conditions. Insurers are legally obligated to share with you their product disclosure statement (PDS) before you purchase any of their products. This product disclosure statement will let you know any policy terms and conditions, including:
- Types of events or illnesses covered,
- any exemptions that may affect the payment of policy benefits, and
- all financial charges required for providing the coverage.
- It is crucial to understand these policy terms and conditions and figure out if they work for you before making any purchase.
Insuring your kids may be one thing you don't want to do (I mean no one wants anything bad to happen to their kids,), but it's a necessary move if you want to secure your kids' future and ensure that they are covered in cases of emergency.