As a grandparent, you have the same views as those of a parent – to love and protect your grandchild and ensure their future is set up for success. One of the ways many grandparents ensure this is through life insurance as it can help provide financial protection and a legacy for their grandchildren.
Like most insurance, life insurance can get pretty complex, maybe even discouraging to those who aren’t familiar with the ins and outs. To help weigh your options, we’ve listed the advantages and disadvantages of buying life insurance for your grandchild.
Advantages of buying life insurance for your grandchildren
Bang for your buck
Purchasing life insurance while your grandchild is young can be more valuable than buying it later on in life. Because young children are typically in good health and have a longer future than most, they’re more likely to be insured at a lower rate. Our insurability decreases as we get older. Essentially, you could get better coverage at a lower rate now versus when the child is grown to adulthood.
Longevity and consistency in cash value
A permanent life insurance product such as whole life typically offers cash value, which accrues for the life of the policy. Your grandchild could later use the cash value for college or larger purchases.
Leaving a legacy
Considering our elder generation’s upbringing, financial stability is a popular gift to leave behind for our youth. Many Seniors use life insurance as a tool or benefit to teach financial stability and responsibility. There are also Seniors who chose to leave their benefits to a charity or church as another way to leave a legacy.
Prepared for the unthinkable
Finally, the primary benefit for life insurance is to prepare for the unexpected. Should your grandchild pass early on, a life insurance benefit could help your children during the hardest time of their lives – protection from financial hardship can help ease the burden.
Disadvantages of buying life insurance for your grandchildren
There is no dependent for the child to care for
The main use for life insurance is to help financially support the family being left behind, especially if the insured is the bread winner. Since children are dependents of their parents and don’t need to provide for anyone, some may see life insurance irrelevant in this case.
Final expenses could be covered by savings
Life insurance payouts can cover any final expense costs such as the funeral and burial. If the parents have a healthy savings account and are financially stable, they could use their savings to pay for the funeral and burial expense for the child.
Mortality chances are low
Fortunately, the risk of child mortality is relatively low. Therefore, you may not need life insurance coverage for the traditional reasons such as final expenses.
There is never a one-size-fits-all option for insurance, so you should consider your priorities and desires for your family beforehand. We also recommend using a licensed insurance professional to help navigate through your options.
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