As long as you continue to pay the premiums, a life insurance policy purchased for your child can provide death benefit protection for a lifetime. In adulthood, your child will be able to use the policy to protect his or her own family.
A child’s life insurance policy can accumulate cash value year after year. Your child can then access this cash value for things such as a down payment on a home, college tuition, funding a business opportunity, or providing supplemental income upon retirement when the insurance needs decrease.*
Under the current law, cash values that accumulate in the policy are tax deferred. Even when accessing the cash values, there are no tax consequences in most instances. Also, policy proceeds received by beneficiaries are not taxable.
Life insurance premiums generally increase with age. However, with permanent life insurance purchased early on, it’s possible to lock in the premium at the child’s current age, so the premiums will be unusually low for the child’s entire life.
Once the policy has been issued, coverage cannot be canceled if all required premiums are paid. Also, if a Policy Purchase Option (PPO) Rider is included with the policy, your child has the right to purchase additional coverage at designated dates, regardless of your child’s insurability at those dates. Certain limitation will apply.
Child life insurance is whole life insurance that’s specifically for a minor or young adult. It offers many of the same benefits as regular whole life insurance, but with lower premiums. 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; before that, the beneficiary is generally a parent or guardian.**
When it comes to premiums, you can gift funds to your child or grandchild. They can then use that money to purchase a single-premium life insurance policy—for the same amount as your gift. With such a policy, no further premiums are required. But you can also select the policy of your choice and make the scheduled premium payments on behalf of the child.**
*Note: Accessing cash value will reduce the death benefit and available cash surrender value.
**There may be tax consequences associated with monetary gifts. Neither New York Life Insurance Company, nor its agents, provides tax, legal, or accounting advice. Consult with your own tax professional for information regarding tax implications for gifting to a child.
The policy form number for New York Life Whole Life Series of products is ICC18217-50P (4/18). The policy form number for the Purchase Protection Option Rider is ICC17217-413R. SMRU 1891271