It’s a fact. Insurance gets more expensive as we get older. That is why it’s important to start early. Everything gets more expensive when we get older. I remember when it cost $.50 to cross the George Washington Bridge in New York City. It is going to be $15 in 2015. When I first learned about child life insurance several years ago, the first thought that came to my mind were the late night infomercials of cute children and cheap insurance that cost just pennies a day. You get what you pay for. These products were justifiably ridiculed by financial experts because the risk of mortality for children is so low and you were basically throwing money away.
But as experienced insurance professionals know, not all insurance works like that. Permanent insurance (whether whole life or universal life) is insurance coverage for life. If you want to give your children a head start for college savings, a new home or future business then it’s time to give child life insurance another look.
Forget about the $50,000 term policies for your children. Child life insurance is not about burial and final expenses. It is life insurance. I emphasize the word “life” because if you buy whole life insurance or universal life insurance for your children they will enjoy multiple benefits for the rest of their life that you only wish your parents had done for you when you were an infant.
Let me give a quick illustration, for a newborn female, assuming annual premium payments of $3,650 for 18 years ($10 a day) and an annual growth rate of 8% (the low end of historic index-linked returns) and current crediting rates (which are not guaranteed) the annual premium payments would grow to a cash value of $121,365. Along the way your child has full insurance coverage which will continue to grow as they reach adulthood and have an insurance need of their own.
Unlike stock market investments, there is complete downside protection. In at least one popular product, the insurance company guarantees a minimum interest rate of 2% each year. I can’t even get 1% that at the local bank!