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Should I buy Life Insurance for my Grandchildren?

Grandchildren playing outside

Becoming a Grandparent is a wonderful experience. Grandparents often look forward to giving their “newest addition to the family” gifts and presents.

One gift you can choose to buy is whole life insurance for your grandchildren. This gift offers you peace of mind while supplying financial benefits throughout the child’s life.

There are several benefits in securing a life insurance policy for your grandchildren.

In this post we’ll look into a few of them –

Affordable Premiums

One of the major reasons folks hesitate to purchase life insurance is the cost. Pricing can vary wildly depending on the type of policy, health of the applicant and the amount of coverage.

One huge benefit of a whole life policy is having a fixed low premium for life. No matter how much time passes, your rate is permanently fixed. No rate increases ever.


Examples of monthly premium payments –

$10,000 of Coverage

  • age 5 = $4.80
  • age 10 = $5.50
  • age 15 = $6.90

$20,000 of Coverage

  • age 5 = $8.60
  • age 10 = $10.00
  • age 15 = $12.80

$30,000 of Coverage

  • age 5 = $12.40
  • age 10 = $14.50
  • age 15 = $18.70

The Policy Builds a Cash Value

With whole life insurance policies (also known as permanent policies), a cash value accumulates. This policy feature allows you to borrow money from your policy at any time.

This can allow your grandchildren to take out money for a down-payment on a home, pay for schooling, or in case of a financial hardship.

Excellent Return on your Money

Here is another example of the benefits of youth. The younger your grandchild is when you start your policy, the lower the premium payment. But it also means you have years to maximize your cash value.

Policies like this usually have an average rate of return of 3% – 5%. To give this some context, a good rate of return for a savings account at a bank is about 1.5%.

Tax Benefits

If the unthinkable happened to your grandchild, the death benefit payout from the policy is not taxable.

In most cases, even if money is borrowed against the life insurance policy, taxes are usually deferred. Just keep in mind though, the insurance company will charge interest on the loan annually.

Of course, restrictions may apply; always consult with an experienced life insurance broker to get all of your questions answered.

Lifetime Coverage

Purchasing whole life insurance for a grandchild will guarantee them future insurability. Once they become an adult, they can add more coverage without going through the process of a medical exam.

Why is this important?

What if your grandchild develops a chronic illness or disability later in life. This would make it more difficult to secure a good policy or at the very least, they will pay much higher premiums due to their condition.

Guaranteed future insurability is a MAJOR reason to consider a whole life policy on your grandchild.

Grandchildren smiling

Lasting Legacy

Grandparents provide love and support to their grandchildren from day one. Adding to your legacy by giving the gift of a whole life policy will provide tremendous financial security.

There is no doubt that the relationship you have with your grandchild is incredibly special. Knowing that you can be there for them after you’ve passed away can give you unique peace of mind now.


FAQ

What is Whole Life Insurance?

Whole life insurance is a type of permanent life insurance that covers the individual for his or her “whole” life.

What happens at age 18?

When the child reaches adulthood, they become the policy owner.

Parents consent required?

It depends on your state of residence and the guidelines of the particular insurance company.


Summary

Purchasing Life Insurance for your grandchild is an important decision and not one to take lightly. We encourage you to do your own research, but we want you to know our team is here to help.

With the many life insurance options for grandchildren available, we can help you determine what policy works best for your family.