Allison says my articles are trending boring again, and so I should write about this instead.
Apparently, some of her friends were talking about buying life insurance on their children, and she wanted my opinion.
Back in the old days, children didn't have as long of life expectancies. Some parents had a lot of kids partly to help out around the farm, and burying a child would be a great burden to the family. So, as a solution, insurance contracts came out to help with this gravely morbid but reasonably probable tragedy.
Fortunately, child mortality rates have plummeted dramatically. Also, if one should have such a terrible tragedy, the expenses are survivable for most middle-class families. In fact, arguably after the service care costs should go down to zero. So why do you need a windfall check? I met one wealthy person once who carried it as “grief counseling insurance”. I’m not sure who planted the seed that they needed it for that so they could take time off work, but it was manipulative and ridiculous on its face.
Just a reminder if you're thinking of buying life insurance on your child from a baby food company or a hustling insurance agent, make sure you actually need it first. If you are mega rich and are looking for fancy ways to hide capital from taxes, this might be an option. But if you have a laundry list of priorities in life and not enough money to get everything you want done, this can probably fall off your list.
Thanks for taking a look!
Tom Gartner, MSAPM, CFP®
This article represents opinions of the authors and not those of their firm and are subject to change from time to time, and do not constitute a recommendation to purchase and sale any security nor to engage in any particular investment or legal strategy. The information contained here has been obtained from sources believed to be reliable but cannot be guaranteed for accuracy.