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Parents Do Not Need To Buy Life Insurance For Their Children

Posted by Hank Coleman on Feb 24, 2011

Many parents are bombarded with advertisements for purchasing insurance for their children. For a new parent, we want to do everything we can to ensure that our children are protected. It can be quite overwhelming for a first time, new parent as well who feels pulled in all directions. But, one thing that parents should not worry about is purchasing life insurance for their children.

The Purpose Of Life Insurance

Many consumers do not really understand the true purpose of life insurance. The purpose of life insurance is to protect a stream of income against loss due to the death of an income earner that someone depends on. Insurance is meant to protect a family or another person who depends on someone else’s income to live off of and for support. This is why family members insure the adult income earners and especially the breadwinners of the family that other members of the family depend on for financial support. Insurance transfers the risk of the loss of income because of the death of an income earner from the family to the insurance company. Because of premiums we pay, insurance companies bare the risk of loss for a catastrophic event such as a death.

Do Your Children Earn An Income

Since insurance is used to replace or protect the loss of income, the only question that you need to ask yourself when considering purchasing life insurance for your child is if they earn an income. In almost every instance, unless your kid is a child actor or singer earning an income that the family depends on, then you do not need to worry about insuring him or her. This should be the determining factor in whether or not you purchase an insurance policy against the life of your children. These policies are simply not worth the cost of the premiums.

You Only Need Enough Life Insurance For Children’s Burial Costs

I know that life insurance for your children and thinking about their untimely death is not a popular subject to think about or discuss. But, if you are considering purchasing your child a life insurance policy, you only need enough value to cover burial and funeral costs. There are very few other insurance needs that justifies paying the cost of life insurance premiums for your children. In this case, while funeral costs continue to rise in America, you would still only need to purchase a very inexpensive term life insurance policy for a few thousand dollars, not tens of thousands.

Only Purchase Term Life Insurance For Children

Do not get sucked into the sales pitch of buying a whole life insurance policy for your children. Do not purchase the additional option to convert a term life insurance policy into a whole life policy for your children at age 18. Do not purchase the option for the policy to become guaranteed insurable. Many insurance agents pitch this option as a way to protect your children should they develop a chronic disease early in life that ultimately makes them uninsurable as adults when they turn 18 years-old. The extra cost of these policies for during your children’s adolescence is not worth the price that you pay for such a small payout on a claim. That money would be better spent saving for your children’s college education. Heaven forbid if you child should be come uninsurable early in life, there would be very few people once again depending on his or her income as a young adult. These policies are just too expensive for too little value or probably of a payout.

Being a parent is not a cheap endeavor as any parent knows. Parents should not waste their hard earned money on life insurance for their children that are too expensive and not needed. By understanding the true objective of insurance coverage, you can make rational decision regarding your family’s insurance coverage needs.

Photo – © iStockphoto.com/morganl