Don’t buy life insurance for kidsBy Randell Tiongson on June 19th, 2010
For those who know me and read my stuff, they would know that I am an advocate of life insurance, among other financial instruments. Life insurance is something Filipinos lack sorely and for those who have some life insurance, chances are it is not enough. I stand with my belief that it is a financial instrument that allows you to have peace of mind and a great risk management tool when it comes to the uncertainties in life. In fact, life insurance is the quickest, fastest and most cost-effective mechanism for financial protection in case of untimely demise or serious physical breakdown. It is a travesty that the percentage of insured Filipinos are so unbelievably low and getting proper insurance protection is not in the priorities of many of us. If I had my way, I would want every Filipino parent to have adequate insurance coverage.
However, I do not recommend getting life insurance coverages for children. In the past, I must admit that I made a mistake recommending life insurance for children and even bought some for mine as well. In retrospect, I regret doing so. Investopedia states best why you should not get life insurance for children:
“Life insurance is designed to provide a safety net for your heirs/dependents. Because children don’t have heirs to worry about and, statistically speaking, most kids will grow up safe and healthy, most parents should not purchase life insurance for their kids…”
Instead of paying premiums for coverage, it is better to use those funds and invest in mutual funds, uitf, deposit accounts and other more viable investment instruments and invest it on their behalf. Years from now, you will realize that said investments will perform so much better than the life insurance policy of your kids. Unless you child is a child star and he or she provides for you, reconsider getting a policy for your child. Instead, assess your own insurance needs — chances are you will need to add more insurance on your own life or that of your spouse.
I think a lot of insurance agents would stop reading my blogs after this post… but, I encourage you to periodically assess your need for insurance and act on it — just don’t believe those who will tell you to get for your kids too because it’s really not a good idea.