The simple answer is no, you don’t need life insurance for your children. Surprised? We get it. Even the thought of something happening to your kids is enough to stir up fear and anxiety in every parent’s heart.
And those emotions are exactly what life insurance marketers target when they try to sell you life insurance for your kids. But it’s all based on a bunch of myths! Let’s explore (and debunk) those myths and talk about what you should do instead.
What Is Life Insurance for Children?
Children’s life insurance is an insurance policy that pays a death benefit, usually to the parents, if your child passes away. But here’s the deal: The only job of life insurance is to replace the income of the person who has died. And who ever heard of a child with an income?
Even if you have a budding entrepreneur for a son or daughter (and we hope you do), it’s not likely you’re depending on their income for your own livelihood. So where is this concept of kid’s life insurance even coming from?
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Frankly, it’s marketing hype aimed at selling you something neither you nor your child really need. Here’s the problem: Kid’s life insurance takes a great idea like life insurance—and it is essential protection—and combines it with something totally unrelated.
Why People Buy Life Insurance for Kids
Like we pointed out above, advertisers do a great job pulling at your heartstrings. They make life insurance for your kids sound like the best thing since home delivery for your groceries. Here are some of the myths that keep people buying life insurance for their kids:
Myth #1: It helps me save for my child’s education.
You’ve probably seen this as a feature of whole life insurance for children. The idea is that the monthly premium will build up savings for college. Sounds great, right? Not so fast.
First, the fees will eat away at your return. And the return isn’t great—about as much as a traditional CD (certificate of deposit) you’d get at a bank. Not only that, but you’ll also have to pay fees to get your money when it’s time to pay tuition. In what world is this a good idea? Not the real world—that’s for sure.
Myth #2: It guarantees my child can get more life insurance later.
Some parents and grandparents want to make sure their kids can get good life insurance even if the kids develop a medical problem early on.
The truth is, most people in their 20s and 30s have no problem getting a good term life insurance policy, so there’s really no need to buy kid’s life insurance.
Let’s say you did decide to buy life insurance for your kids, and later, they wanted to carry their policy into adulthood. In that case, you’d both be disappointed to find that there’s a limit to how much you can add to a child life insurance policy. And in many cases, that amount is too small to provide for their family long term.
Myth #3: It covers funeral expenses and other costs.
Yes, life insurance would cover funeral expenses. But the likelihood of actually needing it is so slim that you’re better off putting the monthly premium payments into a savings account. Then you have control of that money and can use it for other reasons, like if your child needs their tonsils taken out. And that type of emergency is much more likely to happen!
Alternatives to Children’s Life Insurance
If you don’t buy children’s life insurance, how do you pay for burial expenses if the unthinkable happens? We’ve got an easy fix. Instead of paying premiums, you should put that money in an emergency fund. If you stash away three to six months of living expenses, you can easily cover the cost of a funeral—or any other emergency that might pop up along the way.
If you don’t have that money stashed away yet, no sweat. You can get a rider for your children on your term life policy (or your spouse’s). A rider is an add-on to a basic policy. Think of it like adding bells and whistles to your car.
This kind of rider is pretty cheap—around $50–60 a year—and it covers all your kids, no matter how many you have, until they’re no longer members of your household (that’s what Dave did for years).
Do the Right Thing
If you’re in the market for new life insurance for you or your spouse, we recommend RamseyTrusted provider Zander Insurance to help you make the right decisions. Zander will make sure your policy will replace your income and put your kids in the best situation possible if tragedy happens and one of you passes away.