September is Life insurance Awareness month, as children get back to school many families settle down after busy summer vacations to review their finances. As a parent you may want to take this time to re-evaluate your life insurance policy to ensure you have adequate coverage. Here’s a policy you may not have considered: Juvenile Life Insurance. Juvenile life insurance is permanent life insurance on the life of a child that accumulates Cash Value. In addition to locking in protection for your child’s future needs, the plan serves as a lifelong financial planning tool and the Cash Value serves as an excellent savings vehicle for the child. Allow us to share how this plan provides financial protection for your child.
Ensuring their future insurability: Age and health factors determine life insurance premium; the younger and healthier an applicant is, the lower the premium. For healthy children, this is the period of their life when they will be offered the lowest premium. If a child develops an illness later in life, he or she may not be insurable, or will have to pay exorbitant rates to obtain coverage. For that child with an existing Juvenile Life policy, if a change in their health profile were to occur, the coverage and premium rates on the Juvenile policy would not be affected. By the time he or she gets married and starts a family, there will be a meaningful amount of coverage in place from that Juvenile policy.
Guaranteed Increase of Death Benefit: Another great feature of this type of policy is the option to increase the death benefit with a special rider. This rider, known by some carriers as the Guaranteed Insurability Rider, allows the insured, in the future, to increase the death benefit without being subjected to a medical exam. This rider can be added for a minimal fee.
Parents have complete control over this asset: The Juvenile Life insurance policy is often owned by a parent, so the child has no access to the cash value. The parent, as the owner, can choose to gift the policy to the child by transferring ownership to that child.
Great teaching tool for children to develop good savings habits: If the parent decides to transfer ownership to the child, the parent can continue paying the premiums or have the child take on the responsibility of making the payments. This policy becomes a fantastic tool to teach the value of savings. For example, a 25 year old male that starts paying the $50/month premium on his $100,000 life policy that was started in his birth year, could see his cash value grow by $1,300/year!** In the same example, the death benefit could also have also doubled to $200,000 by the time he reaches age 38 which places him in a financially secure position for a future family. There’s nothing like seeing your money grow, to incentivize someone to develop a life-long habit of consistent savings!
Accumulating Cash Value: Juvenile life insurance is written as a Cash Value Whole Life policy that accumulates cash value over time. In addition to providing a death benefit, the accumulated cash value can be accessed without restriction. This is helpful for funding the child’s college education, or even as down payment on their first apartment.
If you are about to have a new addition to your family or have a young child and would like to find out more about this coverage please contact us. Remember, this is a great way to secure your child’s financial future, and it is a useful tool to help your child learn money management.
** Values are based on Mass Mutual’s illustration of a 65Life Whole Life policy on standard health rate male newborn. These illustrations are based on Mass Mutual’s 2018 operating and mortality expenses and dividend rate.