Buy A Life
Reasons to buy insurance are different for everyone. But the decision to purchase insurance is, at its core, all about providing financial security for yourself and the ones you care about. Learn why life insurance is important, and who needs it.
buy a life
Buying life insurance protects your spouse and children from the potentially devastating financial losses that could result if something happened to you. It provides financial security, helps to pay off debts, helps to pay living expenses, and helps to pay any medical or final expenses.
Your life insurance policy can deliver a specified sum of money when you need it. Upon your death, your family will receive your policy payout immediately. And that death benefit is generally not subject to federal income taxes. For example, a $500,000 policy provides $500,000 in death benefit proceeds directly to your beneficiary.
5. Dividend potential One of the benefits of purchasing whole life insurance from New York Life is that you will be eligible to receive dividends.4 Although they are not guaranteed, when dividends are awarded, you can take them in cash, use them to offset your premiums, or use them to buy paid-up additional insurance that increases your coverage and cash value, use them to offset your premiums, or take them in cash.
6. Optional riders There are several ways to tailor a whole life policy to meet your individual needs. For an additional cost, you can use riders to purchase additional protection without further underwriting, to pay your premiums if you become disabled, to use some of your face amount to pay for chronic illnesses, or to purchase coverage for your children. Your agent can help you decide if any of these riders are right for you.
1The life insurance death benefit is the amount that is paid when the policy is in effect and the insured dies. The insured is the person whose life is covered under the policy. Accessing the cash value of a Whole Life policy for special expenditures will reduce the available cash surrender value and the death benefit.2A living benefit is any benefit the policy owner can access while the insured is still living. Not all life insurance policies are designed to offer living benefits. 3All guarantees are based on the claims-paying ability of the issuer4While dividends are not guaranteed, eligible policy owners have received them for more than 160 years. Some policies are participating but are not expected to receive dividends.
The policy owner and the insured are usually the same person, but sometimes they may be different. For example, a business might buy key person insurance on a crucial employee such as a CEO, or an insured might sell their own policy to a third party for cash in a life settlement.
You need life insurance if you need to provide security for a spouse, children, or other family members in the event of your death. Life insurance death benefits, depending on the policy amount, can help beneficiaries pay off a mortgage, cover college tuition, or help fund retirement. Permanent life insurance also features a cash value component that builds over time.
To qualify for life insurance, you need to submit an application. But life insurance is available to almost anyone. However, the cost or premium level can vary greatly based on your age, health, and lifestyle. Some types of life insurance don't require medical information but generally have much higher premiums and involve an initial waiting period before the death benefit is available.
WCI readers continue to ask about buying child life insurance and if it's worth it. I would hope that most long-term regular readers already know the answer to this question. But I'm seeing it enough that it is clearly worth addressing.
Not no, but heck no. Child life insurance, like most permanent insurance, is a product made to be sold, not bought. Let's consider the reasons why. And then we'll try to find some articles advocating for buying life insurance on your child and debunk them.
The main purpose of life insurance is to replace the necessary earned income of a breadwinner. If you are financially independent, you don't need life insurance. If you depend on someone else for your income/lifestyle, then you don't need life insurance. Now, a reasonable case can be made to carry some amount of life insurance if you contribute in an economic way to a household, even if that way isn't a paycheck (think stay-at-home mom whose household duties might cost $30,000-$100,000 per year to replace), but that doesn't apply to a child. I have no doubt in my mind that if, heaven forbid, one of my children died, that my household expenses would go DOWN, not up.
In case you've never read through my series on The Myths of Whole Life Insurance (most of what is sold for children) it is important that I point out that the returns on a whole life insurance policy are terrible. Often negative for a decade or two, they are only guaranteed to be about 2% over a lifetime and projected to be perhaps 3-5%. The smaller the policy (like most child policies) the lower the return due to more of it being eaten up by administrative and insurance costs.
I'm always seeing posts from people who were given a life insurance policy at 25 or 40 that their parents had been paying on for decades. The analysis of what to do with it is always complicated. In many ways, they're inheriting your poor decision. Don't do that to your kids.
The worst part about giving the kids your bad decision (to buy whole life insurance on them) is that if you had only given them something with a higher return, they'd be getting a lot more money and with a lot fewer strings attached. The likely return on whole life after 20-30 years is probably 0-2%. If you had just given them shares of a good stock index fund, that return could be more like 7-10%. That makes a big difference over decades, not to mention the better tax treatment on gains when they cash it out. It would be even better if you gave them the money in one of the three ways I'm giving my kids money:
OK, enough ranting about conniving insurance salesmen duping the financially illiterate into purchasing a product made to be sold at one of the more emotional times of life (and sometimes even while they're still in the hospital after delivery).
FWIW I would reflexively give my life for either of my daughters, but had they died as children, that death would have been a financial windfall for the family. The horse expense savings alone probably would have paid for an Aston Martin.
I have both personal and professional experience in this area. I sold a policy to my sister when her son was born. It was a $100,000 whole life policy. When he was 7 years old, he was diagnosed as a Type 1 diabetic which made him completely uninsurable. He is now 18 years old and is taking over the policy. He has 9 options at $100k each which means he is pre-approved to increase his benefits up to $1mil in the future. He is hoping to be a business owner in the future which means he will not have access to benefits through an employer. While $1mil may not be enough benefit to cover his future family, it is certainly substantial enough for him considering he would not ever be able to purchase an individual policy without astronomical premiums.
I work for American Family and can tell you we have products with those guaranteed purchase options. our new policy actually has them automatically built in. I think a child life policy is a great thing for people to get. We have more than one insured whos life insurance performed as well as their stock portfolio in the long term. is it a great investment? no. but thats not what its meant for, that is just an added bonus. It is also GUARANTEED, where else can you get guaranteed returns of over 2% with ZERO risk? Yes, the gerber policies are not good , but if you go through reputable insurance companies who specialize in insurance not baby products that wont be the case.
I have worked with 2 male clients in the last 6 months who have grown up to be medically uninsurable. Both are new dads and want to protect their families. Thankfully, their parents purchased whole life on them as babies. One of these men has GIR on his policy, the other does not. The individual with GIR can purchase $125,000 of Whole Life, no medical questions asked, every 3 years from ages 25-46. The individual who does not have GIR will have to settle with the $75,000 guaranteed death benefit, which will increase modestly over years as his dividends purchase paid up additions.
The point of my post is not to promote juvenile life insurance but to point out something that was not stated in the article that you can have a policy that pre-approves a child for up to $1mil. That can make a substantial difference on a person who has a change in health.
State Farm offers a WL policy with the GIO rider as well. I have seen first hand people exercising the option later on in life that were ineligible. As an agent, it is very difficult telling a middle aged parent of 3 that they are ineligible for life insurance. He is VERY thankful that his parents set him up early in life.
Regarding the other response, life insurance on a Type 1 diabetic can be available at an extremely high cost. My nephew can increase his policy at standard rates (which are the rates given to juveniles). His cost savings on premiums will be substantial.
Soo. I like this article and I need to defend myself against pulling a life insurance policy on myself, for my children from my never married ex. Either she is planning to kill me or use my children as a way to make money either way, I need a few really good valid reasons why it is stupied. I am currently almost considering bankruptcy, the children qualify for Medicaid, I am remarried with a total of 6 children. Her lawyer specializes in personal injuries and I think he has lost his mind. Thanks for help ahead of time
We bought whole life for our kids at a young age, with riders that allow the. To purchase more insurance at various points without exam, qualifying etc. now that they are adults we keep paying premium to make sure their family has some life insurance. Their families are of limitedMeans at this young age and we want to make sure they have at least some protection. Might. It be the highest return but a small amount of money to sleep a little better at night 041b061a72