As financial professionals take on new challenges with a generational shift in the overall economy, it is vital that they look past the two people sitting in front of them and look down the line to the children as well. Often advisors get caught up in what the client needs in the moment and leaves it there, but very few take it further to ensure that the people they are trying to protect from financial hardship after losing a loved one are equally insured.
Stop thinking about the present and start thinking about the future
Protecting the family means protecting the entire family, not just the foundation of the family. A hotly contested topic in this arena is the idea of children’s life insurance. Many advisors say to add a rider to the parents’ policy to help cover the kids in the equation, but there is still a need to protect them after they no longer qualify for coverage under the rider. In many cases term riders are great for protection of the present, but what about 20, 30, or 50 years from now? Why not secure their future now, while it’s affordable, instead of hoping that they will find the importance of life insurance at a much later and more expensive age?
Individual life insurance policies for children can help break the cycle we are seeing in modern society where people rely on GoFundMe or purchasing high premium final expense policies to offset burial costs. Waiting until marriage or retirement to begin looking for life insurance is another common trait. By purchasing a permanent policy early in life, parents can attain affordable rates with a vehicle that protects and builds cash value.
It provides protection their entire life
While many financial professionals will say that the risk of a child dying is much lower than someone in their 20s and 30s, recent studies have shown that younger generations know that life insurance is important, yet choose not to purchase it and opt to spend it on technology and entertainment rather than financial protection. The argument that rates are still extremely affordable as a young adult is no longer relevant, as data shows, at this age there is little to no importance placed on insuring one’s life over insuring a digital device.
It provides a savings vehicle the child can tap into later
As most may “buy term and invest the difference”, it is important to point out that a permanent life policy will not only provide a death benefit, but also include meaningful cash value. If that life insurance policy is tucked away and forgotten, the growth in the cash value amount could lead to being a very solid investment for each child as part of the legacy left behind by the parents, allowing the children to be in a much better financial position than the previous generation.
While the idea of individual policies on children may not be ideal in theory, we, as advisors, have a responsibility of securing their future and this will require a more open minded approach. Having a difficult conversation now will benefit your clients’ children in the future.
Latest posts by Highland Capital Brokerage (see all)
- April 2018 LTC Newsletter - April 26, 2018
- Robert W. Finnegan, J.D., CLU®, Published in Trusts & Estates Magazine - April 18, 2018
- Keys to Dealing with Policy Loans - March 26, 2018