Summary List Placement
A few years back, I worked as a financial advisor for a broker-dealer here in Minneapolis. When you start as an advisor with most firms, they encourage you to not only contact your family and friends, but to also do an overview of your own financial situation to determine what gaps you may have.
My husband and I were quick to buy life insurance for ourselves as we knew we wanted kids in the near future, but after our first child was born, we were also encouraged to buy a life insurance policy for her.
While there are reasons it makes sense to get a life insurance policy on a child, it’s important to understand why you are purchasing it and how the policy works. The policy we went with was a $50,000 “20-Pay Whole Life Insurance Policy.” This meant that the death benefit was $50,000 and it was set to be “paid off” in 20 years.
Why we bought a whole life insurance policy for our daughter
One of the reasons we purchased this policy was the ability to guarantee our daughter’s insurability in the future. This meant that if she were to have some sort of medical diagnosis that prevented her from getting life insurance coverage when she was older, she would at least have the insurance policy that we bought for her when she was an infant and could have the option to add more insurance to it in the future.
More so, however, we purchased this policy so that the cash value component could be used to help pay for college.
We had our daughter’s policy set up so that it would be fully paid off by the time she graduated high school, and then she could decide to either keep the policy or surrender it and access the cash value to pay for school or another endeavor. After doing more research and taking time to contemplate, though, we decided there was a better option for the funds we were putting towards this policy.
We reconsidered when we thought more about the policy’s actual cash value
Whole life insurance policies are oftentimes purchased because of the potential cash value they offer. Although these cash value components can look really promising, it is important to understand that they are not guaranteed.
For the policy we purchased for our daughter, the cash value component was tied …read more
Source:: Business Insider