Q. I have several auto-immune diseases and I’m thinking about buying permanent insurance for my kids. They have a good chance of inheriting my same diseases and they could be uninsurable later in life. What do you think?
— Planning ahead
A. Generally, we think life insurance is completely unnecessary for children.
Life insurance is purchased for many reasons, but the main one is to provide income to a loved one after a family member’s death. This is most common among married couples, and those who want to pay for certain goals — such as college — that could be a burden to your heirs if you died.
Unless the child is a breadwinner, we’d usually say no, your child doesn’t need life insurance.
But given that you fear your kids could be uninsurable when they’re older, you’re making a very smart choice.
It’s something the kids won’t appreciate now, but they will thank you when they’re older.
It’s a great idea, said Ed Gaelick, a Chartered Life Underwriter and Chartered Financial Consultant with PSI Consultants in Glen Rock.
He said your auto-immune diseases should not affect your children’s ability to secure and lock in coverage, assuming they don’t already have the diseases.
“While auto-immune disease doesn’t necessarily mean someone would be uninsurable, it certainly would be more difficult to get approved at standard rates,” he said.
When you look at policies, be sure to be aware of a very important rider called “Waiver of Premium,” which waives the premium should the insured become disabled, Gaelick said.
He advises you add that to any policies you consider.
“If a child is too young — and that would depend on the specific carrier and their underwriting guidelines — where that rider is unavailable, a `combined waiver’ rider could insure the applicant parent from disability, then be changed to the insured’s waiver at a later age,” he said. “An adult with auto-immune disease may not be able to get the combined waiver or the cost for that protection might outweigh the benefit.”
If that’s the case, Gaelick said, having the healthier and/or younger parent be the applicant may be the best strategy.
But he said hopefully, your children are old enough to get their own waiver, making the combined waiver moot.
Gaelick recommends you secure pure whole life from a mutual life insurance company, which is permanent coverage with guarantees. Cash values are not subject to market risk, he said and there are many other features and benefits you could choose from.
“More parents should plan for their children’s future like you are planning, whether they have any diseases or are disease free,” Gaelick said. “Those policies will eventually be one of their best assets.”
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