Archive view: June 2017
Posted on June 30th 2017 in General
Every time I talk to a new parent about a children's whole life insurance, I remember that scene from Lawrence Kasdan's Grand Canyon. A door to door salesman comes to Tina Lifford's door and talks to her about life insurance until suddenly she realizes: "You're trying to sell me life insurance... on my kids?!? Get the hell off my porch!" And, embarrassed, he slinks away to pursue another unfortunate neighbor in the gun-ridden streets. As gruesome as it sounds, a whole life insurance policy for your children makes a lot of sense.
Consider first the difference between a whole life and term life policy. The premium spent on a term life policy is not recoverable as a benefit until the day the insured dies.
(Yes, I said the "D" word because after all, we're talking about someone dying here. A professor of mine once quipped that all physicians must face the fact that, "Life is terminal condition. No one gets out alive.")
Term life establishes a limited legacy for loved ones left behind, allowing them to pay final expenses such as burial or fund life without your income. It also insures you for a specific time, the longest period often being 30 years.
A whole life policy is similar only in the fact that establishes a legacy for your loved ones after you die. The big difference is before you die. Whole life is considered an asset. It's a savings or investment instrument. It develops a cash value which means that at 18, children have a value they can access to pay for college, a home or -- in the case of many -- an internet start-up. It can be used to establish credit. Most importantly, it's something you can outlive. If the insured reaches 100 to 120 years of age, depending upon the plan, everything you paid into it comes right back to you, often with interest.
Let's do the math: so every month from the moment of your kids' birth, you pay the $10 premium -- and it's a premium that does not rise or fall unless you change the policy. Then at age 18, your child decides they want to go to Stanford or Harvard. You can borrow against the cash value in the policy to help pay for the tuition. The amount you can borrow depends on the face value of the policy and how much you have maintained the policy. There is no death involved, no muss nor fuss. Think of a children's whole life policy then as an extremely reasonable savings for your new baby.
Now how gruesome is that?
There are a variety of whole life policies. For grandparents, it's a valuable first birthday present and one they can pay up for several years instead of US Savings Bond. Call us and we can show you one suitable for you.