The subject as to whether young children should get life insurance continues to be a highly debatable issue. The proponents of life insurance for kids say that it is a great low-cost way to set aside money for the future. It is also meant to ensure that the child would have insurance as an adult in case an illness makes him/her uninsurable in later years. On the other hand, its detractors see it as an outdated product that has long been replaced by more effective savings tool such as the 529 Plans. They also go as far as to say that it is inherently wrong to seek insurance on someone who doesn’t have a job. It is a fact that the primary purpose of life insurance is to replace a wage earner’s income.

Whether or not a parent should get life insurance for kids depends on the objective for buying one. Life insurance companies normally would not allow buying a huge amount of insurance on kids. It is presumed that no parent is looking to get rich on a child’s death. Children have no income of their own and thus their death is not expected to result to a financial loss. For those who do not expect to have available cash for burial expenses, taking out a life insurance for a child may make some sense.

Some parents choose to take out a Whole Life Insurance policy on their kids for the cash value amount they intend to use for college expenses. However, Whole Life Insurance is quite expensive while the small cash value earns a very low guarantee interest rate. A child life insurance term policy through a child rider on the parent’s policy while putting some money away for an education account or a conservative investment account may be more economical and prudent.

From another point of view, insurance on a child’s life seeks to replace the income of the parents that would likely be interrupted with the tragedy of a child’s death. This is because the ability to continue working and earning would definitely be affected in some way for a certain period of time while dealing with the loss. In this sense, having life insurance on a non-earning child prevents compounding the loss with unforeseen financial problems.

Having a life insurance for a child is also seen as a benefit as he/she grows into adulthood. The child can eventually take over the ownership of the policy that is incredibly cheap, the low rate of which can be maintained for the entire lifetime. One reason for buying life insurance for children is the presence of a family history of health problems such as diabetes and heart disease which can make it difficult for then to get one during the prime income-earning years. The investments for a child’s future are best done via equity investments although there may be a need for a moderate level of insurance on the child as well.