The holiday gift that grows over time
It’s a scene so compelling and so easily to envision that it might as well be a Norman Rockwell painting. Wrapping paper, ribbons, and boxes strewn about on Christmas morning, discarded as quickly as the toys they concealed are brought forth, played with, then quickly forgotten as the next shining thing appears.
Parents and grandparents often are dismayed when the presents that their little ones absolutely had to have are broken within days if not hours of being received, or found later, only to be dropped into the trash or stuffed into the back of a closet.
There is one gift that an adult can give to that loved child that may not be appreciated immediately but can generate benefits beyond measure when the need for it becomes real. The placing of a life insurance policy on a child may not seem like a traditional Christmas or holiday gift, and the giver certainly hope it doesn’t have to be used soon. It can however be the most cost-effective and valuable present any parent or grandparent can give.
Here are the reasons why.
1. Unlike most gifts and presents, a life insurance policy placed on a child only grows in value, both in terms of death benefit and internal value. Properly structured, a $50,000 policy placed on a newborn can exceed $75,000 by the time that child turns 25.
2. Life insurance premiums are never lower than when the policy is placed on a child, and they never increase.
3. A low-cost insurability benefit rider guarantees the child can obtain additional life insurance as he or she ages without having to prove insurability. This can be especially important if the child, either as a youth or an adult, is diagnosed with a disease that would prevent the purchase of traditional life insurance and do so without premium markup. This means the child, as an adult, can easily ensure his or her family is financially protected in the event of premature death.
4. Because the policy’s internal value grows over time, it can be used as an additional financial tool if the adult child needs it.
Some may argue that placing life insurance on a child is a waste of money because the child produces no family income, or that investing in a mutual fund creates a better return. Those arguments cannot be denied, except for this. Money put into a mutual fund or other investment could ultimately create a taxable consequence for the adult child, whereas life insurance proceeds are income tax-free.
And while, yes, a child generates no family income, there can be no greater pain for a parent than to deal with the loss of a child. Imagine that pain being compounded by the stress of having to find the funds necessary to deal with the financial aspects of that loss. Those funds are generated by life insurance.
So, go ahead and give those toys and clothes and things that can put a smile on a child’s face, but back up those gifts with something he or she, as an adult, will know how someone thought about their future and their own family.
Alan T. Girton is a veteran agent with Indiana Farm Bureau Insurance. To learn more, visit https://www.infarmbureau.com/agents/Alan-Girton-Howard-Kokomo-IN