Juvenile Life Insurance

Juvenile life insurance is a great way to start a savings plan for your child before they even know what money is. Since the cash value generated within the policy increases each year the premiums are paid, there will be significant funds available to your child when they reach age eighteen. This cash value can be withdrawn up to total premium you paid, which is called the basis, tax free. This will create a large pool of cash to help your kid or kids pay for any expenses they incur, such as college, a home, or a wedding.

Life insurance as an investment vehicle can be a great way to supplement a child's need for income during their life. Speaking to a financial professional about the benefits of juvenile life insurance and what uses you and your family may have for it is always a great idea. This form of protection is known as whole life insurance, since it offers protection for the life of the insured.

Juvenile Policies Build Cash Value

Juvenile life insurance differs from term insurance or no health questions life coverage because term will only provide insurance protection for a particular, specified period of time. Term is generally cheaper protection for this reason. The main benefit of whole life is the cash value that is built into the juvenile policy. The cash value of these policies allows the insured to take withdrawals from the policy without a lapse in coverage.

The main components of juvenile life insurance are the face value and the cash value. When you pay premiums, a certain portion of the policy goes to pay various expenses of the insurance company and another portion is used to build the cash value in a savings like account. This account is paid an interest rate that is specified in the contract, over the duration of the juvenile policy. Thus, your cash value build over your entire life since juvenile life insurance covers you until you die.

Juvenile life insurance policies are generally written to be paid up or not require any premium payments after the age of eighteen. Even after premium payments stop, cash value continues to build. If you should die at any point over the duration of the policy, your beneficiaries will be paid the face value of the juvenile policy and the cash value that accrued up to that point. So if your parents or guardians initially bought a $500,000 policy and you died at age 50 with a cash value of $125,000, your beneficiary would get $625,000 generally tax free.

A juvenile policy is a great way for a grandparent to reduce the size of their estate. If your total assets are approaching the point where they will incur estate tax, juvenile life insurance is a great way to give your grandchildren a head start on saving for their future. There many ways to include this policy in a trust and most likely avoid any federal or state income tax. Speak to your financial planner or estate tax attorney to figure out the best way to transfer your money to your children and grandchildren.

Parents or grandparents can also use their annual gift tax exclusion to gift the premium and not incur gift tax. From 2009 - 2012, the annual gift tax exclusion has remained at $13,000 per person according to wills.about.com. (1) This would be one of the best ways to fund a juvenile life insurance policy.

Juvenile policies are very easy to obtain and generally do not require medical examinations like what would be necessary in a term or permanent policy for an adult. Very large policies for minor may require a doctor to signify that the child appears to be in good health but intensive medical exams are very rare.

One of the most beneficial aspects of buying a policy when a child is very young is the ability to watch the cash value grow until it is needed. Once your child or grandchild reaches adulthood, they will start incurring large expenditures where this will come in very handy and they will be eternally grateful to you for buying this instead of toys or clothes. Another benefit would be the fact that they policies are generally protected from creditors if your children ever run into problems with money.

Juvenile life insurance is a great gift for any child. Make sure you speak to a financial planner or good insurance agent to find one with expenses that are reasonable. Some permanent policies have some pretty high expenses that can take away from the growth potential. Make sure you shop around to several companies before making any decisions. Giving a gift such as this is one way to make your child or grandchild very happy when you decide to tell them of the policy.

http://wills.about.com/od/understandingestatetaxes/a/historygifttax.htm Retrieved 2011-12-6.

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