How Insurance on Your Child Becomes a Legacy
Last week, I was chatting with a local business owner and the topic of insurance on children came up. I ended up telling her a story about how we used life insurance in our family and at the end she told me it left her with goosebumps. To hear that the story resonated so much, I decided to share it again here.
There is great debate in the insurance industry on whether life insurance for children is needed. Typically, life insurance is purchased to replace lost income and to cover final expenses and since a child doesn’t bring in an income that supports the family, the focus of insurance should be on the parents. We whole-heartedly agree that the focus should be on the income-producing parents first.
When I was a child, my father purchased $10,000 of permanent life insurance on myself. Obviously no one ever wants to think about something bad happening to their child, but just in case, I was insured. But the real magic happens the longer I live. Bear with me as I explain. You see, this is a permanent policy, so it will be in place until I pass away, but my father only paid the premiums for 20 years. After that timeframe, the insurance is fully paid for. This type of policy has an additional feature, in which the insurance company shares its profits with the policy (currently about $35/year) and with that money (dividends), more life insurance is purchased. So when the policy was purchased, it was worth $10,000 and now it’s worth more than $30,000 and it keeps growing every year at no cost to us!
The Best Part – The Impact
30 Years Ago: My father purchased the insurance. He was financially protected if something happened to me before I became an adult.
Today: This adds to my family’s financial protection if something happens to me (and at no cost to my family, remember the insurance is fully paid for!)
In 20 years: My wife and I will have enough savings to cover our own final expenses, and the proceeds would likely go to my son, who would be starting college at that time in the event of my premature death.
In 40 years: My wife and I would still have enough savings, my son will likely have enough savings to cover his final expenses, and the proceeds can be passed on to his children.
That’s what I call a LEGACY. All because one person took the time to consider the impact this could leave on four (or more!) generations of our family. The proceeds may not pay out for 50 more years at which time my father may be long gone – but how cool is to know that he made a difference for future generations that he may not even meet. Powerful. Even as a grandparent, you can put insurance on a child that will provide benefits for generations to come. That’s the reason we just purchased insurance for our son, Elliott.