Life insurance is generally used to replace the income of a deceased breadwinner. If a person with no income dies without life insurance, would his/her heirs be financially compromised? Most people would say no.
But as previously discussed, a non-working spouse with children should absolutely be insured. Since, by definition, a non-working spouse has no income, what is being insured is the value that person brings to the family unit. While children are intrinsically valuable as human beings, very few of them bring economic value to the table.
Well then, if a child doesn’t earn an income and doesn’t provide economic value to the family, is there a rational for insuring him/her? There can be, but it is often overlooked or dismissed by parents.
Since the acquisition of life insurance is a) predicated on one’s health and b) more expensive the older one is, purchasing it for one’s child(ren) accomplishes two things; 1) it removes health from the equation (assuming the child is healthy) and 2) it locks in the lowest premium.
Now there are some who say that insuring children is a waste of money and I agree that it isn’t for everyone. First, your own affairs must be in order before you contemplate insuring your child(ren). That means that at a minimum, you should have your life insurance program in place and be making the maximum allowable contribution to your retirement plan. This cannot be emphasized enough.
By procuring life insurance on your child(ren), you are taking care of a future need. While they will in all likelihood have to augment that policy with additional life insurance when they become adults, it can provide a solid base on which to build. A rider is even available that guarantees their ability to purchase additional insurance at standard rates in the future, regardless of their health.
In essence, it is just providing something for their future, an advantage, if you will. Not terribly different from other advantages we parents try to provide, such as music lessons, sports training, or an exceptional vacation experience.
I, along with virtually all parents, abhor the idea of profiting from a child’s death. Unfortunately, some children do die, albeit a very small minority, thankfully. In those unfortunate cases, perhaps the proceeds could be used to fund research that would ultimately prevent other parents from experiencing a similar tragedy.
So in my opinion, given the right set of circumstances, life insurance on children is indeed a good idea. To make it an even better idea, get the grandparents to fund the premium.