Why Buy Life Insurance for Kids (or grandkids, nieces, nephews)

 "Isn’t it inconceivable, depressing, and pointless?"

What I thought

This was my gut reaction when someone suggested buying life insurance for my young kids. My thoughts were:

  1. It’s inconceivable and depressing.
     Children are meant to bury their parents, not the other way around. The idea of losing a child is unimaginably painful, and no amount of money could ever begin to fill that void. A payout would feel like putting a Band-Aid on a heart attack.

  2. It’s pointless.
    Isn’t life insurance meant to protect those left behind? A couple with or without kids buys life insurance so that the remaining spouse can pay the mortgage, work less depending on the age of the kids, and maintain their quality of life. Since a child has no financial obligations, why buy something that will not be used?

What I Learned

I was naive. My assumptions were built on incomplete truths and misconceptions. Here’s what I know now. (Disclaimer, I am not a financial professional or advisor nor am I selling any particular product).

1. The Difference Between Term Life and Whole Life Insurance

  • Term Life Insurance is temporary, typically covering a set period (e.g., 20 years). It’s much cheaper than whole life and ideal for addressing specific needs like paying off a mortgage or supporting children until they’re financially independent. However, much like renting a home, it doesn’t build equity. Both renting a home and buying term-life insurance serve short-term needs at a lower monthly cost.

  • Whole Life Insurance, on the other hand, is permanent and more expensive because it’s for life. It does not serve a short-term need. Premiums are generally fixed, and the policy builds equity over time. This equity is really an investment, providing financial stability and growth. Think of it like owning a home: as you pay mortgage, taxes, and maintenance, you build a valuable asset over time/ [I assume, of course, that  you are not buying property along a rapidly eroding shoreline like North Cove, Washington -- see Figure 2].

Additionally, you may not have to pay premiums for ever. You could accelerate payments—finishing in 10 or 25 years, or by 65—so you pay when you can afford it most.

2. It’s Cheaper and Easier to Get Insurance When You’re Young

Buying life insurance at a younger age means substantially lower premiums. Health underwriting is also simpler. 

3. Long-Term Care Riders

The third thing I learned doesn’t concern buying a policy for your kids but rather using insurance to protect them. Since 2010, a new add-on product—long-term care riders—has become available. These riders let you access the benefits of your life insurance policy while you’re still alive, helping to cover the soaring costs of long-term care. Thanks to modern medicine and better living standards, we’re living longer than ever. While that’s great, it also places additional burdens on our kids, who are juggling careers, partners, kids, and their own homes. These riders provide peace of mind, ensuring we won’t have to lean too heavily on them as we age.

3. Whole Life Insurance for Kids Is actually an Investment across generations

Its actually not pointless. Here’s why:

  • It’s Untouchable: Like a retirement plan or 529 college savings plan, the insurance policy is safe from your own impulsive or unanticipated needs. 

  • It’s a Stable Investment: Undoubtedly, the stock market can give you a higher return over the long-term. But, I don’t have the commitment or confidence to take the risk or face major market swings and devastating events like the 2007-2008 burst bubble. Life insurance is one tool in the financial diversification toolbox. 

  • Tax Advantages: Like retirement accounts, whole life insurance policies grow tax-deferred, meaning they don’t increase your current tax liability.

But the biggest benefit is Intergenerational Wealth Transfer: By buying a life insurance policy on them, I am investing in future generations.

  • I’m securing something they’ll inevitably need as adults, but at today’s rates, which are significantly lower because of inflation and because they’re younger. They can focus their future income to cover kids, property, and retirement savings.

  • I am investing in their children (if they choose to have kids) or their own estates but not with funds that they can squander.

Why Should You Care?

Looking back, I was wrong to dismiss life insurance for kids outright. Of course, any thought related to the death of a child is inconceivable and depressing for a parent. That one is a no-brainer. Term life for kids is generally not necessary. However, whole life insurance is a different story. I had to reprogram myself to think of it as a financial and wealth management tool, not “insurance”. Think of it as:

  • A diversification tool in your financial portfolio.

  • A tax-efficient way to transfer wealth across multiple generations.

  • A safety net with long-term care benefits for you and your family

Life insurance isn’t just about preparing for the worst—it’s a safe tool for multi-generational wealth transfer. Buy it early whether or not you have kids. It’s once less thing to worry about when you have your hands full with a newborn or toddler!

Comments

Post a Comment

Please comment on the post or propose another topic for me to articulate my thoughts.

Popular posts

Obituary. USAID (1961-2025). An Introspection and Prediction

Image
I mourn USAID the way we knew it. The agency that I worked for a decade has essentially disappeared, with only a fraction of it reincarnated and subsumed into the State Department. I empathize with all my former USAID colleagues, contractors, grantees, sub-grantees, recipients, project beneficiaries, vendors, and suppliers in the United States and around the world. All of you are economically and emotionally harmed. The battle will ensue in the Courts and in the end, Congress will have no choice but to act (see my January 4 post explaining this locus of power). The next incarnation of US Foreign Assistance will be skinny, laser-focused, more intertwined with U.S. Peace and Security, and obviously A.I.-driven. Disclaimer: the views expressed in this post are solely my own, published under my first amendment rights, and do not necessarily reflect the views of the United States Government or any of its current or former federal agencies. What Other People Say Designed by  Freepik “Aft...
Read more

Fact vs Fiction: dissecting our news feeds

Image
News 1 : A ruthless and determined enemy force of 30 to 40 fighters attacked the U.S. base at 5:20am. In just a few minutes, the U.S. sustained three casualties. A U.S. Army specialist was killed when a rocket propelled grenade destroyed a truck he was driving. Two contract pilots died when their plane caught fire during take off after it was barraged by small arms fire and a rocket propelled grenade. The enemy force destroyed six U.S. aircraft, one allied aircraft, several vehicles, and other property. The U.S. and its ally engaged the enemy fighters for several hours before they withdrew leaving behind six dead. News 2 : The desert wind whipped sand against the canvas of the supply canvas cover. The U.S. sergeant squinted, his eyes watering, as he guided his string of camels through the treacherous terrain. The humped animals, though stubborn, were faring better than the exhausted mules they'd replaced to haul military supplies. A sudden, sharp crack echoed across the hills, foll...
Read more

Gandalf Advice: Stand Up?

Image
“There are other forces in this world, Frodo, besides that of evil. Bilbo was meant to find the ring. In which case, you were also meant to have it, and that is an encouraging thought.” — Gandalf, The Lord of the Rings: The Fellowship of the Ring What Do I Think? Gandalf’s words to Frodo reflect an age-old debate: Are we merely playing out a script that has already been written, or do we have the power to shape our own destinies? The struggle between free will and predestination is not just a historical theological debate—it is playing out in society and governance today. It impacts how we interpret success and failure, in how we justify actions, and out day-to-day decisions. Designed by Freepik Christianity has long been divided on this question. Strict Calvinists embrace predestination, the idea that God has already determined who will be saved and who will be damned. In contrast, strict Arminians believe in free will, asserting that while They know what we will choose, the Almighty ...
Read more

Vengeance in scriptures

Image
Consider these three quotes, each regarded as the word of God within their respective religious traditions: "inflicting vengeance on those who do not know God and on those who do not obey the scriptures. They will suffer the punishment of eternal destruction." “And kill them wherever you overtake them and expel them from wherever they have expelled you, and oppression is worse than killing.”  “Do not spare them, but kill both man and woman, child and infant, ox and sheep, camel and donkey.’” Image by macrovector on Freepik . Before you scroll down to identify the sources (think spoiler), consider what they collectively mean and imply.  What Do I Think When it comes to understanding sacred texts, I find myself navigating between three perspectives. First, that these texts are not exactly what God revealed but rather what men (intentionally gender-specific here, since religious scholars and leaders have historically been male) have altered over time to serve their own interests...
Read more

Shakespeare's "All the world's a stage"

Image
"All the world's a stage" monologue from As You Like It by William Shakespeare (Act II, Scene VII): "All the world's a stage, and all the men and women merely players. They have their exits and their entrances, and one man in his time plays many parts. His acts being seven ages.  At first the infant, mewling and puking in the nurse's arms. Then the whining schoolboy, with his satchel and shining morning face, creeping like snail, unwillingly to school.  And then the lover, sighing like furnace, with a woeful ballad made to his mistress' eyebrow.  Then a soldier, full of strange oaths, and bearded like the pard. Jealous in honor, sudden and quick in quarrel. Seeking the bubble reputation, even in the cannon’s mouth.  And then the justice, in fair round belly, with good capon lined. With eyes severe, and beard of formal cut, Full of wise saws, and modern instances;  And so he plays his part.  The sixth age shifts Into the lean and slippered pantaloon. With ...
Read more

Contact Form - Subscribe to updates or provide a quote for me to respond to

Name

Email *

Message *