Is a Whole Life policy for children with a disabled parent a good idea?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:What is the coverage on the plan? If it's a $1M policy for life--then sure, not a bad investment, assuming the company is likely to be around long-term. But if it's only $200-$300K (as I suspect it is) you are better off investing that money.

You'll pay ~$50K over the life of the policy. At a relatively conservative 5% yield, that would give you $200K+ after 30 years. With more aggressive investments, you might have closer to $1M in that same time period. And if the child lives a normal life to, say, 70, it would grow far more.

It isn't so much about whether the child will need life insurance, but about whether this investment is a reasonable way to get that financial security.

Whoops, I misread the premium as $280 a month. So $280 a year is only $4200. How much is the policy for? Is the company a longstanding insurance firm? That's a very low rate for a limited pay policy, so those two pieces of information are important. It might be a reasonable investment if the company is reputable and the payout is at least $100K.

The payout is 25k. It’s a long term reputable company. It guarantees them the ability to buy more insurance without an exam when they’re older. So really I’d be buying a policy with minimal coverage to make sure they can have more insurance coverage when tbey have their own children...even if they have seizures as well.

So for the base policy, if your child dies before about age 55, having the policy you paid into for 15 years at $280 year may be a net positive over you putting those same payments into an investment account for your child. If your child dies after 55, that money probably would have been worth more if put into an investment account.

As for the option to buy additional coverage as an adult, what kind of coverage will they be able to buy? If it's an expansion of the existing policy, it will probably also be whole life. Typically that coverage expansion is paid at "standard adult rates," which for whole life without an application can easily run upwards of $10k per year if you buy it as a young adult. If your child can't afford that as a young adult and needs to wait until they're 40, the annual premium will be even more.

I agree with the pp who suggested looking to adding a child rider to your own life insurance policy. Those are typically far less expensive and usually have the ability to convert it into permanent life insurance as an adult if your child has developed a medical condition that will affect insurability.

[Anonymous]

Thanks for the suggestions. I need to learn more about the type of insurance they can get in the future.

A lot of people are comparing this to an investment but I don’t actually consider it an investment. Just insurance that they can get future insurance.

[Anonymous]

Anonymous wrote:Thanks for the suggestions. I need to learn more about the type of insurance they can get in the future.

A lot of people are comparing this to an investment but I don’t actually consider it an investment. Just insurance that they can get future insurance.

Yes--the reason whole life policies are generally not recommended is that people do think of them as investments, and they are usually poor investments (as in this case--if your goal were just for your child to have $25K upon death, you would be far better off investing that money elsewhere). But here, that isn't your goal, so you need to find out more about whether this gets you to your desired goal and then compare that to the cost of something like a child rider on your current life insurance policy (assuming you have one). Your situation is unusual, so the typical advice isn't as relevant.