Best Children’s Life Insurance Policy. How to Leave a Legacy with only $99.

When people think about life insurance for children, they typically think about the old child whole life policies your grandparents use to buy or maybe even the Gerber Grow Up plan. Both of which are a waste of money.

The type of life insurance policy for children we are talking about is much, much different from those old types of plans. It is a permanent plan but not a whole life insurance plan.

It’s called a Child LIRP. And I set up one for both of my kids when they were babies.

This plan serves three main purposes. It provides guaranteed insurability for life, the ability to access cash in the child’s ’20s or ’30s, and to give them a stream of tax-free income when they retire.

The best part is I only need to fund this policy for 20 year and just $99 a month.

Although nobody wants to think about the loss of a child, owning this type of life insurance coverage for a child can provide a number of financial benefits – both in the short- and long-term.

How the Old Whole Life Insurance for Children Works

Your grandparents may have set up a child whole life insurance policy for you when you were young or they may have opted for the Gerber Grow Up plan. It’s likely that, while well-intentioned, this plan offered only a small death benefit, along with cash value that grew – but at a turtle’s pace.

Unfortunately, the only one that these plans usually benefitted was the life insurance company. That’s because, with no real benefit to speak of, it was probably determined at some point that the premium wasn’t worth paying.

But a Child LIRP is much different from whole life coverage – and there are several reasons for this. One is because these plans offer a significant death benefit for the child, starting on day one. This can provide funds for parents and other loved ones if the unthinkable occurs. It can also offer guaranteed insurability throughout the child’s life – even if he or she contracts an adverse health condition in the future.

Another key benefit of a Child’s LIRP is the cash value – which can grow to an excess of a million dollars by the time the child reaches retirement age. Plus, there are strategies for accessing this cash tax-free, so it can be used for paying off high-interest debt like student loans, or a nice supplement to future retirement income.

How a LIRP for Children Works 

Starting a Child LIRP (or IUL for a kid) can provide both financial security and protection throughout all phases of his or her life.

A Child LIRP is an indexed universal life, or IUL policy, the cash value can grow, based on the performance of an underlying market index such as the S&P 500. These plans can offer the chance to attain double-digit upside performance, depending on the stated “cap,” or maximum. We can set you up with the best life insurance companies as we know all the carrier’s products and benefits.

In addition to the opportunity for cash value substantial growth, with a Child LIRP, there is no need to worry about the loss in value – even if the stock market tumbles. That’s because IUL’s provide guaranteed minimum floors of 0%, which keep the principal safe.

As the cash value in the policy grows, it is able to compound on a tax-deferred basis, meaning that no tax is due on the gain. This can allow the money in the policy to grow and compound exponentially over time.

Unlike IRAs and employer-sponsored retirement plans like 401(k)s, there is no IRS “early withdrawal” penalty for accessing funds from a LIRP prior to age 59 ½. This means that money is available at any age, and it doesn’t have to be reported on a tax return.

There is also no funding limit with a LIRP as long as you do not MEC the policy. So, if the child decides to add more money to the plan over time, these funds will also have the benefit of growing tax-deferred. With that in mind, this buying life insurance coverage can offer a great alternative for tax-advantaged growth, even if an individual’s IRA and/or 401(k) have been “maxed out” for the year.

Decide On Term Or Permanent Life Insurance For a Baby

When it comes to life insurance, there are two main types: term life insurance and whole life insurance. Term provides coverage for a set period of time—usually 10 to 30 years—and pays out only if you die during that timeframe. Term life insurance is rarely a good idea for a child.

Permanent life insurance coverage provides protection throughout your entire life, but requires regular monthly premium payments which will build up cash value. When it comes to providing for children’s future education costs, permanent insurance is usually the best choice, as you can build up a lot of cash value and solve many of life’s future challenges when buying this plan.