Buying insurance for younger people.

Are you looking for a truly valuable gift for an upcoming birthday, high school graduation, wedding, college graduation, or  birth of a child or grandchild? 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 his or her financial future.

Need more reasons?

  1. It won't wear out or fall apart. Life insurance can last a lifetime, provided you continue to pay the policy premiums. The policy you purchase for a son or daughter today can still be there years from now providing death benefit protection for your child's future son, daughter, or spouse.
  2. 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 against for any purpose—to provide a down payment on a first home, to help pay for college, to capitalize on a business or other opportunity, or even to help fund a comfortable retirement decades from now. (Note: 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.)
  3. There are tax advantages. Under current law, cash values that accumulate in the policy are tax deferred. Even when cash values are borrowed, there may be no tax consequences in many instances. Finally, proceeds received by beneficiaries are generally not taxable as income. Consult with your tax advisor for more details.
  4. Premium rates may never be lower. Premiums generally increase with age. However, with permanent life insurance it is possible to lock in the premium at the insured's current age for life.
  5. This policy can help guarantee future insurability. Once the 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 insured has a right to increase coverage at designated dates, regardless of insurability.

The details

Juvenile insurance is life insurance that insures the life of a minor or young adult. When the insured is a minor, the 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 adult, the child 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, you purchase a single premium life insurance policy for whatever face amount that sum buys. The advantage is that no further premiums are required. (There are tax consequences associated with gifting amounts. You should consult with your own tax professional for tax advice.)

The second choice is to select the premium or death benefit desired (amount subject to underwriting limitations). Then, make the scheduled premium payments. (Note that there may be gift tax consequences, since the premium is considered to be a gift to the insured. Consult your tax advisor before acting.)

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