Being a grandparent is one of life’s greatest gifts. And while it’s fun to shower them with toys and clothes, grandparents can play a significant role in setting their grandchildren up for the future. Purchasing a life insurance policy for your grandchildren could potentially help pave the path to financial security and give invaluable peace of mind.
What is whole life insurance?
Whole life insurance is a type of permanent life insurance that provides a set amount of coverage for as long as you live. The premium for whole life insurance never changes—what you pay for the first month is what you’ll pay for every month the policy is in force.
A whole life insurance policy can be a great gift for grandchildren because it can last a lifetime. As long as the premiums are paid, a whole life insurance policy provides a death benefit, accumulates cash value each year and has the potential to give your grandchildren a head start on their financial future. Generally, premiums increase with age, but with a whole life policy, it’s possible to lock in a premium at the insured person’s current age for the rest of their life.
Why You Should Consider Life Insurance for Grandchildren
As extended caregivers, grandparents are eligible to purchase whole life insurance for their grandchildren. The insurance can be purchased in the child’s name, which means the child becomes the policy owner once they are an adult. Though rules can vary, some states allow grandparents to purchase the life insurance policy without the parents’ permission.
Peace of Mind Now
A whole life insurance policy provides a death benefit in the event of a passing. This benefit can cover the cost of the funeral expenses, family counseling, any uninsured medical bills and more. This allows the family to focus on grieving their loss without the added financial stress.
Peace of Mind Later
Purchasing a whole life policy for your grandchild guarantees that the coverage will be there even if they become disabled or develop a chronic illness that may make obtaining life insurance difficult or even impossible. Future insurability is one of the key benefits of whole life insurance that can give you peace of mind.
Unlike term life insurance, whole life insurance has the potential to accumulate cash value each year. Even better, the cash value is tax-deferred, meaning taxes only need to be paid once the money is taken out. Money can be borrowed from the policy at any time for any purpose, such as providing a down payment on a home, paying for college or even starting a business.
Other Things to Consider When Transferring Life Insurance
When purchasing a life insurance policy for grandchildren, there are a few things to consider. In addition to seeing if parental consent is needed, some plans allow premiums to be paid in lump sums, whereas others require ongoing payments. Additionally, you’ll want to carefully review the rates of return, surrender fees and any other costs associated with the policy.
Many gifts lose value over time, but as the name implies, a whole life policy is a gift that can last their entire life. Beyond incredible love and support, with a whole life insurance policy, grandparents can give their grandchildren a financial head start and peace of mind.
We can help determine what policy is right for you and your family by comparing prices and coverage of some of the most trusted carriers in just minutes.