A surprisingly perfect gift for your kids or grandkids
Not a tech toy, will last for years: it’s life insurance
Think of all the special events in the lives of your children or grandchildren: Birthdays, holidays, graduations, weddings,—even celebrating the birth of a new little one. And if you’re like some of us, you spend hours trying to think of the perfect gift for the occasion—something that will show your child or grandchild just how much they mean to you. Here’s a suggestion, and one you won’t find in any stores: life insurance.
We know it may seem a little different in the gift department, but consider these reasons why life insurance can be just the right choice:
- It can last a lifetime—and then some. Permanent life insurance provides death benefit protection, creates a living legacy that will accumulate cash value with each passing year, and may help your child or grandchild get a head start on their financial future.
- It won’t wear out or fall apart. Provided you continue to pay the policy premiums, the life insurance policy you purchase for your kids or grandkids today can still be there years from now—something that material things can’t provide.
- It has accumulation potential. Most gifts lose value over time. A permanent life insurance policy, on the other hand, has the potential to accumulate cash value each year. Cash values can be borrowed for any purpose—to provide a down payment on a first home, to help pay for college, to start a business or even to help fund a comfortable retirement years down the road. Keep in mind: Loans against your policy will accrue interest and decrease the death benefit and cash value by the amount of the outstanding loan and interest, withdrawals reduce the available death benefit.
- There are tax advantages.* Under current law, cash values that accumulate in a life insurance policy are tax deferred. Even when cash values are borrowed, there may be no tax consequences in many instances. Also, proceeds received by beneficiaries are generally not taxable as income. Talk with your tax advisor for more details.
- Premium rates may never be lower. Premiums generally increase with age, but with permanent life insurance, it’s possible to lock in the premium at the insured person’s current age - for life.
- This policy can help guarantee future insurability. Once the life insurance policy has been issued, coverage cannot be canceled as long as all required premiums are paid. Also, if a Policy Purchase Option (PPO) Rider** is included with the policy, the person insured has a right to increase coverage by purchasing a new policy at designated dates, regardless of insurability.
Some Additional Details about Buying Life Insurance for Young People
Because, well, details are always important.
- When a person insured is a minor, the life insurance policy is generally owned by the purchasing adult until the child reaches the age of majority as defined by state law. Upon reaching the age of majority, ownership of the policy can be transferred to the child.
- Once the child is an insured adult, he or she can select the beneficiary. Prior to that, the beneficiary is generally a guardian or parent.
- You have two choices regarding how premiums should be handled.
- First, you can take a lump sum (such as $10,000) that could otherwise be given as an outright gift to the child or grandchild; instead, purchase a single premium life insurance policy for whatever face amount that sum buys. The advantage is that no further premiums are required. Please note: There are tax consequences associated with gifting amounts. Talk with your own tax professional for advice.
- The second choice is to select the premium or death benefit desired. Then, make the scheduled premium payments. Please note: There may be gift tax consequences, since the premium is considered a gift to the insured. Talk with your tax advisor before acting.
Your kids and grandkids mean the world to you—we get that! If you have questions about buying life insurance for young people, your New York Life agent is always here to help. Simply use the Talk to Us tab or the Consult an Agent form on the page, and an Agent in your area will contact you at your convenience. Or click here to learn all the ways we can work together.
*There may be tax implications for policies recognized as modified endowment contracts (MEC), or if you partially surrender a policy in which the surrender exceeds the cost basis of the policy. Distributions including loans from a MEC are taxable to the exten t of the gain in a policy and may also be subject to a 10% additional tax if the owner is under age 59 ½.
**The new policy must have a face amount of at least $25,000, and the charges for the PPO Rider will vary based on the payer’s risk class and face amount.