Child Life Insurance

There are many reasons to purchase a life insurance policy for your child. To insure a baby or a child is not expensive. The amount you will pay in premiums would be minimum. The idea behind insuring a child is very simple; once insured, your child will never have to worry about purchasing a policy for themselves, at the lowest possible cost. 

The best type of policy is a Participating Whole Life policy. This type of policy has an annual tax free dividend deposited every year into the policy. It is also payable for 20 years, however it continues to grow til your child is age 100. The tax free dividend is used to purchase more units of life insurance and the balance is deposited to a cash value account. This is your child’s money to do as they please with. 

In the beginning, either the parent or grandparent is the owner of the policy. When you feel your child is financially responsible, you can transfer ownership to them, tax free. Should they decide not to use the cash value, they may in turn, transfer ownership to their children, again, tax free.

There are a lot of insurance companies that provide this type of policy. In this example, we will be using an Equitable Life insurance policy.  Their current dividend is based on 6%.

Female Child, under 6 months of age. Annual premium chosen is $3000.  This gives this child a guaranteed minimum insurance policy of $283,927. The payment is made for 20 years. 

Year 21, the dividend received is $4,173. The Cash Value accumulation is $80,586 and the insured amount has grown to $606,587.  At this point, the payments are done however the policy continues to grow.