Should you purchase life insurance for your kids? There are already many personal finance articles telling you no, but Jeff Opdyke put the reasoning in the neatest way by sharing his struggle in his WSJ column.
Let me summarize some rational and/or emotional reasons below:
1. Do you want to benefit from the death of your kid?
2. Kids don't produce income, so the only tangible loss is burial cost. Do you really need an insurance to cover the small cost of burial?
3. Think insurance as a saving tool at the minimal? Life insurance for kids can hardly be an efficient saving vehicle. Try tax-advantaged 529 plans or Coverdell Education Saving Accounts for your kids' college expenses.
To put it into perspective, GerberLife.com offers to provide $10,000 coverage to my 2-year old at $7.28/month (WA Grow-Up Plan). The rate is guaranteed until my kid turns to 21, and the cash value is equal or higher than the total premium paid after 20 years. Coverage can be as high as $20,000. (Yes, it is Gerber the baby face -- do you know Gerber is also in the business of insurance writing?)
By simple math, I need to pay $87.36 a year for $10,000 benefit. I don't think I will be in short of $10,000 for the rest of my life, so the insurance coverage really does not mean anything to me. Think this as saving? Is less than $100 a year enough to cover the college books, not to mention tuition?
My kid's college is still 16 years away, but I plan to start a Coverdell account by next year -- of course I expect my kiddie to complete at least a 4-year college, and it does not hurt to take some tax advantage in the process. (Why do I prefer Coverdell over 529 plans? Let me find some time to discuss that next time.)