Insuring children lives are often overlooked. Parents and grandparents must consider insuring the lives of children in their care.
Children Lives Need to be Insured
While the parents and grandparents must make sure that their lives are insured first and foremost, if funds are available to insure the children, the children lives need to be insured.
Insurance Premiums for Children are Low
The insurance premiums for life insurance for children tend to be very reasonable because of their long life expectancy. However, tragedies and accidents can and do occur everyday.
And, no one wants to have to take up a collection or draw down savings to bury a child. Therefore, what amounts to less than a dollar a day. for example, for a child entering kindergarten at 6 years old, the annual premium for a 10,000 policy would be $57.60.
This would be a whole life policy that build up cash value and one that the child can keep at a low premium once he grows up and becomes self-reliant.
One other matter to consider is that if the child become uninsurable, for whatever reason, and the existing policy is in force, it can not be cancelled by the company as long as the premium continues to be paid.
Call (773) 614-3201 for more information on insuring your children. If you have any thoughts on this matter, leave your comments below.
An advisor for college whose role is to help parents and grandparents to save money for your youngsters’ education should focus on at least two areas: 529 plans and life insurance.
529 plans were conceived as an opportunity for parents and grandparents to save money for their children or grandchildren’s college education.
They were created by Congress in 1996 to be offered by each state.
The number 529 reflects the section of the IRS code. It offers a chance for these funds to be put into investment vehicles (including stocks and bonds) in which the returns on the investment can be realized free of federal income taxes. If allowed by your state, your investments may be deductible from your state income taxes.
529 Plans
In that 529 plans are an investment decision, the return on your investment is subjected to the vagaries of the stock market cycles. In recent years returns on many of these investments have been non-existent or negative. Such a situation can easily jeopardize your youngster’s college education.
While 529 plans remain a viable option for concerned family members, what’s often not taken into consideration is what if the parent or grandparent meets an untimely death. At that point the contribution comes to an abrupt halt although the costs of a college education continue to rise faster than the rate of inflation.
If a 529 plan is chosen, then a life insurance plan covering the contributor to the 529 plan is essential. Either a whole life plan or a universal life insurance plan would be appropriate. A term life plan should not be chosen. It offers no cash build up and it’s just limited to a specific number of years.
Whole Life and Universal Life Insurance Plans
Both a whole life plan and a universal life plan offer a tax-free build-up and will not count against the assets evaluated in determining the student’s college financing package. An equally important feature and perhaps the most important, is the death benefit. If the contributor dies prematurely, then their effort to provide for the youngster’s college education would be self-completing.
If you as a parent want to build up a college education fund for your children and have a hundred dollars to invest monthly, it would make sense to invest $25 a month in your 529 Plan and $75 per month your whole life insurance plan. The choice is yours. The return on your $25 per month is totally uncertain, that includes both you principal and your interest.
All whole life plans which I am familiar with offers you both a guaranteed return and a non-guaranteed return plus the death benefit which would go to your child in the event of an untimely death.
Keep in mind that the 529 plan has no death benefit, and is therefore, not self-completing.
Are you concerned about college educational planning for your child or grandchild? Leave your questions below.
