By Dr. James M. Dahle, WCI Founder
WCI readers continue to ask about buying child life insurance and if it's worth it. I would hope that most long-term regular readers already know the answer to this question. But I'm seeing it enough that it is clearly worth addressing.
Should I Buy Life Insurance for My Child?
Not no, but heck no. Child life insurance, like most permanent insurance, is a product made to be sold, not bought. Let's consider the reasons why. And then we'll try to find some articles advocating for buying life insurance on your child and debunk them.
Why Child Life Insurance Is Not Worth It
#1 Your Child Has No Income
The main purpose of life insurance is to replace the necessary earned income of a breadwinner. If you are financially independent, you don't need life insurance. If you depend on someone else for your income/lifestyle, then you don't need life insurance. Now, a reasonable case can be made to carry some amount of life insurance if you contribute in an economic way to a household, even if that way isn't a paycheck (think stay-at-home mom whose household duties might cost $30,000-$100,000 per year to replace), but that doesn't apply to a child. I have no doubt in my mind that if, heaven forbid, one of my children died, that my household expenses would go DOWN, not up.
#2 A Typical Burial Isn't That Expensive
Others advocate that you should buy life insurance for your child to pay for their burial expenses. “It's only pennies a day,” they say. Well, the reasons it's only pennies a day are that it's extremely unlikely that your child will die and because a burial cost isn't that expensive, either. A typical burial is < $10,000. If you can't cover $10,000 out of either your current earnings or your emergency fund, you have a lot bigger financial problems than whether to insure your children. But sure, if that would be a financial catastrophe for you, then buy your kid a $10,000 life insurance policy.
#3 It Doesn't Preserve Insurability
Some people buy life insurance on their kids thinking it will be great for them in case they develop diabetes at age 8 or something and can't buy life insurance as an adult. However, their life insurance need as an adult is likely to be $500K-$5M, and that doesn't even include the effects of inflation over the next 20-50 years (which at 3% turns that $500K-$5M into $900K-$9M at 20 years and $2.2M-$22M at 50 years). Do you really think that $10,000 whole life policy is going to make any kind of significant dent into that kind of need? Not a chance. This isn't a disability insurance policy that is sold with a “Future Purchase Option” rider. There's no guarantee they can actually buy more life insurance at a reasonable price later. And nobody is going to buy a $2M whole life policy on their child. Give me a break. If you're buying life insurance from the same company that sells you baby food, there's an issue.
Only one person in this picture carries life insurance. Guess who?
#4 Life Insurance Is a Terrible Investment
In case you've never read through my series on The Myths of Whole Life Insurance (most of what is sold for children) it is important that I point out that the returns on a whole life insurance policy are terrible. Often negative for a decade or two, they are only guaranteed to be about 2% over a lifetime and projected to be perhaps 3-5%. The smaller the policy (like most child policies) the lower the return due to more of it being eaten up by administrative and insurance costs.
#5 Nobody Knows What to Do with an Inherited Life Insurance Policy
I'm always seeing posts from people who were given a life insurance policy at 25 or 40 that their parents had been paying on for decades. The analysis of what to do with it is always complicated. In many ways, they're inheriting your poor decision. Don't do that to your kids.
#6 If They Don't Die, They Can Use the Cash Value in Their 20s
The worst part about giving the kids your bad decision (to buy whole life insurance on them) is that if you had only given them something with a higher return, they'd be getting a lot more money and with a lot fewer strings attached. The likely return on whole life after 20-30 years is probably 0-2%. If you had just given them shares of a good stock index fund, that return could be more like 7-10%. That makes a big difference over decades, not to mention the better tax treatment on gains when they cash it out. It would be even better if you gave them the money in one of the three ways I'm giving my kids money:
#1 A Roth IRA
The daddy match allows all their earned income to go into a Roth IRA, never to be taxed again, while they spend the equivalent amount of my money.
#2 A 529
If used for college, a 529 account is a way better plan than anything else. Not only is there an upfront state tax break in many states, but all earnings are tax-free.
#3 A UGMA
For those non-college expenses, it's better to have the money in their name, so it is only taxed at their lower tax bracket. In fact, unless it becomes a really big account or is invested very tax-inefficiently, chances are it won't be taxed at all.
OK, enough ranting about conniving insurance salesmen duping the financially illiterate into purchasing a product made to be sold at one of the more emotional times of life (and sometimes even while they're still in the hospital after delivery).
What Do Others Think of Child Life Insurance?
Donna Fuscaldo at Fox Business does a typical journalist article where she doesn't give her opinion. She just found someone with opinions on both sides of this “argument” and presented their views. She talked to someone who sells life insurance:
With a term policy, Bill White, vice president, life insurance and annuity product line leader at insurer USAA, says the insurance is added as a rider and once the child grows up, it can be converted to the child’s own $100,000 policy. He adds that type of coverage would ensure if the unthinkable happened, the funeral costs would be covered.
And someone with some sense:
“You buy insurance strictly for risk protection,” says Tony Steuer, creator of Insurance Literacy “Because it’s mixing in two different types of financial products, it’s not taking the best of either one.” “Buying life insurance as an investment made sense back in the 1940s when there were limited options, but today there are countless ways to grow money with relatively low risk taking,” says Steur, pointing to an exchange-traded fund with low fees.
The article does point out the only valid reason for life insurance on a child that I could find—if your child supports you financially.
One instance where buying a life insurance policy on a child makes sense is situations where the parents are dependent on their child for their livelihood (think Miley Cyrus or other child stars).
I would point out that if you are reading this blog, it is highly unlikely you're in that situation. Even if your child is a star, you're probably not financially dependent on them.
Here's one from the Insurance Information Institute (sounds unbiased, right?) It talked about the usual wrong reasons to buy insurance, then throws out this beauty:
Still another reason for buying life insurance on a child’s life is part of a program to teach the child financial responsibility. Typically the insurance is whole life insurance, ownership of which is transferred to the child when he or she turns 21.
Sounds like a good way to teach your child to be financially illiterate to me, or at least demonstrate to them your financial illiteracy as soon as they realize what you've done.
U.S. News got it right, when it wrote an article titled 4 Types of Life Insurance You Should Never Buy:
2. Life insurance for children. In general, life insurance for kids is a huge waste of money. That’s because (thankfully) most children are born healthy and live a very long time. And since children don’t have any income, you don’t really have any reason to insure their lives, as cold as that may seem. Just because you don’t buy insurance doesn’t mean you don’t love your children. It means you are smart enough to put that money to better use—like saving for a college education.
I love the line about how it doesn't mean you don't love your kids if you don't insure them. Take that, Gerber!
Do your kids a favor—ensure financial independence for yourself, then put something away in a higher-returning investment inside a tax-protected account that they can use in their 20s when they can really benefit from your help.
What do you think? Did you purchase life insurance on your child? Why or why not? Do you regret it? Did your parents buy life insurance on you? Was it helpful? Comment below!
[This updated article was originally published in 2017.]
My parents didn’t buy life insurance for me and I don’t plan to buy life insurance for your children. I don’t mix insurance and investing, so I don’t purchase whole life insurance (child or otherwise), and I don’t pursue investment or trading strategies which attempt to insure against market downturns (e.g. some option strategies).
I think it is all backwards in this society. For example, I know I can’t afford to leave any inheritance or money for my child in case I die. I might not even be able to take care of my child at present because I don’t earn enough for myself. Conclusion for a reasonable person would be – DON’T MAKE A CHILD. Period. Can’t afford to provide financially for one, including in case of death – don’t get one! But an American idiot would think: Oh, but there’s life insurance, but there’s marriage and so a right to sue my husband for money, but there’s food stamps, but there are loans and credit cards, oh and one more thing, there’s Medicaid too…So there are bunch of ways to get money in other ways than to responsibly earn for myself and to save for my children and/or pets…..But the Americans don’t want to be financially responsible. They make babies, relying on governments and insurances and crefit cards or divorced husband’s to support them. What a disgraceful way to “earn” money to care for the children that you can’t afford to have in the first place!!!! Shame on you.
I wish there is a LIKE button.
You might want to leave “the Americans” rant out of things. How did we go from an article showing the pro’s and con’s of investing in an insurance product to a tirade against Americans? Americans are some of the hardest working around. IF they are looking into “insurance” it’s because it’s a product that’s been around since our grandparents always talked up the virtues of having-enough-just-in-case-something-unexpected-happens. As for people who take advantage of freebies or welfare (which has no place in this conversation to begin with) of which you’ve alluded too – YES, there will always be people who thinks someone else should foot the bill (the taxpayer) and owes them a living, though excuse me; of many other countries , per population that have incredible amounts of people living on the “dole,” please stop being so obvious in your hatred of ///the American.
Loosing 3 children all at once is mentally
and physically devastating and if it were not for Gerber grow up $ 50,000 each policies. I would be financially devastated. How are you going to convince me I could have earned that much money with any investment in less than 9 years? That’s $150,000 when I needed it. Most of us middle class Americans make between $24,000 and $28,000 per year. So how would I invest $37.39 per month × 3 = $112.17 ×12 months =$1,346.04 per year × 9 = $12,114.36 years if they were all the same age which they are not so it is substantially less and the investment would have to been spred out over 9 years. How could I do this and make well over $135,000.00 profit?
( Impossible ). So those of us that know people do die very randomly dont really buy into it being such a foolish idea to insure a child’s life.
Steve,
I’m terribly sorry for your loss. I can scarcely imagine the emotional impact of losing even one child, let alone three. However, I’m struggling to understand the financial impact of the loss. Did you really have $150,000 of expenses surrounding the loss? If so, what were they? If not, then I think you were (by definition) over-insured.
How about him taking a significant amount of time off work to grieve? That’s not cheap. The burial of 3 children is a min of 30K
He’s still going to need to pay his bills while not working. If I lost all of my children I would need to be placed inpatient somewhere because I would want to die. As we know inpatient anything is not cheap! Over insured? I think not.
Health insurance would cover that last cost. Many docs could bury 3 kids with their emergency fund. Even if not, that risk is so low it’s hard to advise people to buy life insurance on kids to cover it.
[ad hominem attack deleted]
Wow. People actually buy life insurance for their children? Thanks for letting me know. I guess this is a real problem since I see marketing for people to do it (they wouldn’t market it unless people were buying). I just assumed nobody bought it though.
Hell, people buy life insurance for their dogs!
I don’t see how buying life insurance on a kid could ever be a sign that you love them. Betting on a terrible event isn’t love.
And walking around naked is just as dumb if its really cold outside. If you read ( at all) you will find that adults aren’t the only class of people who die. And unless you know the exact timing of anyone’s demise, life insurance is one of the better vehicles to offset the cost of not only burial expenses, but also excess medical expenses not covered by health insurance. I’d be hard pressed to find a health insurance program that has a $250 deductible and 100% co-pay. And while many people talk about investing in reality a majority do not ever get around to it.
I disagree that purchasing insurance for needs that you can self-insure is a good idea.
Actually, that’s not true. My son has a terminal illness and now I wish I had opened a policy before his diagnosis as I’m sure now he is completely uninsurable. I love my son very much, but these things do happen and we have no way of looking into the future.
I’m sorry to hear about your son.
However, I’m unclear what the financial issue is. Are you not able to pay for the funeral out of earnings or savings? Were you relying on his income for some reason? Did you need to take some time off to cope with the loss?
Why do you feel you should have bought life insurance on someone whose income you weren’t relying on? What do you feel the purpose of life insurance is?
Insurance is not betting, it’s hedging and I’m willing to bet the house you will pass away some day.
We put all monetary gifts kids received from birth through college graduation into a UTMA. As they got older they decided what proportion to save from gifts. We invested conservatively because the point was to teach them the value of saving, in addition to investing. At college graduation they had 20-25K which was enough to be helpful but not life changing as a 20’s fund. Plus, they felt ownership over the account so are thoughtful in using it. At 21 in our state it automatically rolled into being their brokerage account. In addition we used 529s and set up Roths when they had jobs as teenagers. I was not as generous as WCI. In the mommy match they were required to save a minimum of 15% to get a the match. We did not reimburse taxes either. Again my main point was to teach them money management not have the most money possible.
Absolutely totally agree… Life insurance for kids is a total ripoff.
FWIW I would reflexively give my life for either of my daughters, but had they died as children, that death would have been a financial windfall for the family. The horse expense savings alone probably would have paid for an Aston Martin.
I recall getting Gerber Life Insurance mailings shortly after our kids were born. Who did they pay to know we just brought babies home? And they make baby food and baby insurance??? How diverse!
I tossed those and started 529 Plans for our babies. If you want to do them a favor, start reducing or eliminating their student loan debt 18 years before they would start accumulating it.
Best,
-PoF
I disagree with this post. First of all, most traditional life insurance companies don’t even offer a $10,000 life insurance policy. The minimum size is typically $100,000. The purpose of a whole life policy on a juvenile is not to accumulate cash. It is to protect insurability.
I have both personal and professional experience in this area. I sold a policy to my sister when her son was born. It was a $100,000 whole life policy. When he was 7 years old, he was diagnosed as a Type 1 diabetic which made him completely uninsurable. He is now 18 years old and is taking over the policy. He has 9 options at $100k each which means he is pre-approved to increase his benefits up to $1mil in the future. He is hoping to be a business owner in the future which means he will not have access to benefits through an employer. While $1mil may not be enough benefit to cover his future family, it is certainly substantial enough for him considering he would not ever be able to purchase an individual policy without astronomical premiums.
If a juvenile policy is set up properly, it can have a profound positive impact on someone’s life. I have life insurance policies on my two children and they are pre-approved for up to $1mil. I know if they have an adverse change in health during their childhood, they are SET for LIFE.
So his parents were able to buy a policy that essentially had a $900K future purchase option on it? This is the first I’ve heard of a policy like that. What was the policy if you don’t mind me asking?
Also type I DM CAN purchase insurance which I’m sure he knows but instead pretended otherwise (sure it’s more expensive and the DMneeds to be controlled).
This doesn’t even include that almost all kiddie polices get surrendered, the lower return on kiddie polices compared to adult, the additional costs that don’t go to CSV or DB for paying monthly instead of yearly which is what happens in these cases, the fact that even the 1 million is insufficient bc of inflation or that if they do live into adulthood and invested that money that over those 30-40 years likely would do better.
The only person setup for life is the agents selling this stuff.
Correct. MassMutual policy.
What’s the name of the MassMutual policy? Do you have a link to some documentation/prospectus? I’m sure many people would be very interested in the ability to lock in insurability for $1 Million while only actually paying for $100K of insurance.
Here is a link with some information about the policy. It does not have pricing information as that varies by state and age of the kids. I purchased this on my kids when they were 6 & 4 and it was about $40/month each kid. It would be less if I purchased it when they were born.
http://massmutual.weebly.com/uploads/1/4/0/6/1406137/whole_life_rider_guide_li1712.pdf
Thank you for sharing that. The relevant page in the brochure says this:
The Guaranteed Insurability Rider (GIR)
guarantees you the right to purchase
additional insurance, without proof of good
health, at specified dates in the future. The
additional insurance can be an increase to
the face amount on your existing whole life
policy, or the purchase of a new whole life,
universal life or variable universal life
policy that is available for sale when you
exercise an option.
I think it’s cool that you can actually purchase up to $900K of future insurability. While that would have to be whole life, and you’d have to buy a $100K whole life policy to get it, at least the person would be able to buy coverage.
Thanks for the email to let me know your comments ended up in the spam folder. Readers may be interested in the comment you made by email:
And to those of you giving Jamie a hard time about non-existent trademark issues, thanks a lot! (Yes, that’s sarcasm.) I just lost an incoming link to the site (which helps in Google rankings.) 🙂 Maybe if we’re extra nice she’ll put it back up. I’ve definitely got some trademark issues my attorneys and I are working on, but that isn’t one of them!
Can this please be added to the article ???
Standards and Practices of blogging states that the article is modified when the comments prove fallacies in the article.
Feel free to send me a link to the “standards and practices of blogging”.
You need to realize that the risk is actually higher for the insurance company initially. Most of the serious early life ending stuff pops up in the first few years so they have priced this in. That’s why they give you specific times when you can increase and not just whenever you want. For instance you can’t buy 100k and next year raise it to 1 million bc of something tragic that pops up and will cause death soon. It’s also why fully underwritten adult polices perform better.
I’m really curious as to the details of the policies mentioned by two people now and would like to take a look at them. At least with a policy or rider like that you can actually make an argument about locking in future insurability, which a $10-100K policy really doesn’t do.
I don’t see future insurability as an argument for buying life insurance for children…. even if we worry deeply about the child possibly developing some pre-existing condition that might in 20 years prevent them from buying insurance. Sorry.
Why would this 21-year-old need life insurance? Because they have children of their own? And because they haven’t yet acquired other forms of insurance like an employer group health plan or Social Security Survivors benefits?
This becomes pretty emotional pretty fast, but isn’t this insurability argument another play on the emotion of losing a child? Except now the insurance company throws in the mental picture of your deceased child leaving behind orphaned grandchildren?
I agree with you
With that said, if someone wants an emotional choice then have at it which is why I don’t focus on that rebuttal part.
Most people have a need for life insurance at some point in their life. For a typical person it might be from age 25 when they have a kid until age 65 when they are financially independent (even if mostly due to Social Security.) There is some value in preserving that insurability that is worth some price. I probably wouldn’t pay much for it, but I’d probably pay something. What I haven’t yet seen, and that two commenters are arguing, is some product that actually does this at some reasonable price.
Now, you can also argue that even if you’re uninsurable that doesn’t mean there is a bad outcome. Not only does Junior have to become uninsurable, but he also has to have no access to a group plan, and he has to have some people depending on him financially, AND he has to actually die young. The likelihood of all that happening is pretty darn low and perhaps not even worth insuring against at all, especially if the cost is high.
My argument in the post was that buying a $10K, $50K, or even $100K policy by itself (the typical policy sold to parents) with no FPO rider of some type doesn’t really “lock in future insurability.”
I work for American Family and can tell you we have products with those guaranteed purchase options. our new policy actually has them automatically built in. I think a child life policy is a great thing for people to get. We have more than one insured whos life insurance performed as well as their stock portfolio in the long term. is it a great investment? no. but thats not what its meant for, that is just an added bonus. It is also GUARANTEED, where else can you get guaranteed returns of over 2% with ZERO risk? Yes, the gerber policies are not good , but if you go through reputable insurance companies who specialize in insurance not baby products that wont be the case.
there are also options to only have to pay for the policies for 10, 15, 20 or 30 years and have them for life
So what is it meant for if the insurance isn’t needed because nobody relies on the child’s income and it isn’t a great investment? It’s a product designed to be sold, not bought.
I don’t have a link but I have a brochure and a I ran a mock illustration (both for the MassMutual policy option). How do I get these to you?
MassMutual Whole Life insurance…Legacy 100 or Legacy 65 (I prefer 65 for juveniles)…with the Guaranteed Insurability Rider attached.
I have worked with 2 male clients in the last 6 months who have grown up to be medically uninsurable. Both are new dads and want to protect their families. Thankfully, their parents purchased whole life on them as babies. One of these men has GIR on his policy, the other does not. The individual with GIR can purchase $125,000 of Whole Life, no medical questions asked, every 3 years from ages 25-46. The individual who does not have GIR will have to settle with the $75,000 guaranteed death benefit, which will increase modestly over years as his dividends purchase paid up additions.
Both of these individuals are incredibly thankful for the purchase their parents made. Parents don’t purchase juvenile life insurance expecting their child to die…they purchase it with the expectation that they will live a long and full life.
And if you don’t believe in it, it’s very simple…don’t buy it.
Thanks for sharing! I agree if you’re going to buy a juvenile policy (which is probably a mistake most of the time) you ought to get one with a guaranteed insurability rider, and a big one at that.
For some reason my whole reply didn’t post.
@WhiteCoatInvestor–Yes. He purchased a $100k policy when he was born with 9 options at $100k each. He can exercises these on certain ages, when he has a kid or gets married. He is pre-approved for up to $1mil.
@Rex. The bottom of my post states that if he were to purchase a policy as a Type I diabetic, the rates would be astronomical. While perhaps insurable, it may be cost prohibitive.
The point of my post is not to promote juvenile life insurance but to point out something that was not stated in the article that you can have a policy that pre-approves a child for up to $1mil. That can make a substantial difference on a person who has a change in health.
State Farm offers a WL policy with the GIO rider as well. I have seen first hand people exercising the option later on in life that were ineligible. As an agent, it is very difficult telling a middle aged parent of 3 that they are ineligible for life insurance. He is VERY thankful that his parents set him up early in life.
So what are the details: What is the minimum I have to buy today to be able to buy say five million in 30 years?
Max is 100k per option. You have 11 times to exercise the options so max would be $1.1 million
What I’m trying to get at is what is the cost to lock in insurability. I don’t want the insurance now. I want insurability later. What is the minimum I can pay now to be able to get $1.1M later? Assume a healthy newborn.
If you live in AZ, call me (520)900-7842 and i can give you a quote. Otherwise, you will have to reach out to an agent that is licensed in your state.
Oh come on, that’s a cop-out. Run a generic quote.
Yes. They purchased a $100k policy with $900k of increase options that he could exercise at $100k a time. Through MassMutual.
Regarding the other response, life insurance on a Type 1 diabetic can be available at an extremely high cost. My nephew can increase his policy at standard rates (which are the rates given to juveniles). His cost savings on premiums will be substantial.
[Ad hominem attack deleted. Stick to attacking ideas rather than people if you wish to continue commenting on this site.]
The main purpose for buying a child a whole life policy is future insurability. The policy my parents took out when I was born and also the policies I have on my kids have 8 options to buy additional insurance up to age 42. No medical underwriting required. My policy I pay a $990 premium and it pays me $7000 cash value I can either take tax free or reinvest into the policy. What investments do you have that beat that year after year? Ohh it’s also guaranteed.
So many misconceptions in one paragraph.
Let’s start with the “purchase future insurability” issue. How much future insurability can the kids buy at the usual age people need life insurance (say age 30) and how does that compare to what they are likely to need? Usually not very well.
Second, the $7000 is a result of BOTH the $990 premium AND the cash value you already have in it. Pretending the return is only from the $990 reflects misunderstanding of how the product works and the opportunity cost of your cash value.
Finally, guaranteed returns on a good whole life policy bought today are about 2% over 50 years. Even projected returns are only 5%.
FWIW…My husband had IDDM and is a business owner. We use term life and ADD. He was able to purchase a group disability policy for his practice that gives it to his employees as well.
Oh, and we did not get life insurance on our kids when they were born despite the fact that they had an increased risk of IDDM and our net worth was far negative then.
We have 3 kids and we purchase them whole life insurance. Now, they are 7, 3 and 5 and all have 3 policies each.
I would to clarify that the Arthur buying whole life for his kids is not the Arthur who usually comments on this site. Jim, I may have to change my handle for my upcoming guest post — I’d hate for people to get the wrong idea about me. How about ArthurMD/MBA?
Yea, that’s an issue with blogs that forums don’t have. You can put whatever you want in the name field.
This article is horrible. There are many different types of policies and some insurance agents can be conniving and convince you to purchase the wrong one. However, a lot of the information put out in this article is just flat out wrong. For instance, the assumption that anyone should be able to afford a $10,000 funeral at any given moment is ridiculous and asinine. Many familes only make 30-40k per year. That is just purely ignorant and snobbish. Second, most policies DO guarantee insurability, per a guaranteed insurability rider included in the policy. Once the policy is on the books, per the rider (and insurance law) a child can then raise their face amount when they get older without having to undergo any medical questioning or evaluation. The importance of this can not be understated. Despite what this article says, it is very hard to get good, affordable life insurance for many reasons. Reckless driving, mental health issues, depression, drug abuse, etc… make getting approved nearly impossible. The author sounds like an incredibly ignorant financial advisor. Financial advisors think about everything in terms of return on investment because that is how they make money. Then when the market turns and people lose half their portfolio, like in 2008, they still make their money. They don’t experience the losses. Life insurance is a protection against those losses for the consumer. Yes you want to invest your money, and no not everyone needs life insurance. However, any good investor knows you should diversify your portfolio and protect against your losses. Life insurance is one way to do that, if you have assets that you need to account for and protect. Now as it pertains to childrens life insurance, someone said the minimum is like 100K which is false. Childrens policies are always small. The law requires them to be, so that the life insurance can’t be bought by parents to improve their own financial situation. The highest dollar amount any carrier I work with is 50K and those policies never get written. We stay low, 5-10K, because children don’t need more than that. Now consider that it costs about 4-8 dollars a month to insure a child. That is affordable for everyone and guarantees they will be able to get whatever amount of protection they need throughout their lives regardless of their medical condition.
I almost just got the popcorn out to watch this one…
However, having been part of a child passing and funeral this week, the expense is much less that 10K. It will likely all cost about 2K, partly because we didn’t have anybody work the weekend and chose a Thursday for the funeral instead of Friday or weekend. Even if we had, it would have only been a $1000 more for weekend service and ground opening.
You must be a very regular reader. You’re only 19 months behind on the blog. Where were you then when I was publishing such a horrible blog? I could have really used you back then, but now that nobody is reading these comments all that’s left is for you and I to say mean things to each other. Seriously though, I’m curious if you’re this abrasive in real life. Do people react well when you call their work horrible? Does that help you to sell them life insurance for their children?
At any rate, since you’re new around here and clearly don’t follow the blog regularly, let me clear something up for you. The regular readers of this blog should have $10K saved up to pay for things like a funeral. They make at least $10K a month, sometimes as much as 3-5X as much. I’m not writing for Joe Everyman. I’m writing for high income professionals. Snobbish? Maybe. Ignorant? Definitely not. It appears you’re the ignorant one for spouting off without even knowing where you are. In fact, you don’t even seem to know who the author of the post is! Here’s an internet Pro Tip: Read the about page before leaving a blog comment. That’ll serve you well.
Now, let’s turn to the tiny amount of substance in your post. Let’s say I buy a $5K policy on my kid. How much guarantee insurability can I buy with that? Can I buy $5M of guaranteed insurability with a $5K policy? How much? Which company and policy?
Wow, you just convinced me with this post to never bother with your blog again, nor would I ever consider your services if you are a licensed financial advisor. The vast majority of parents in this country do NOT make anywhere near at least $10,000 per month. I guess you’ve shown your blog is only for the 2%ers, not for anyone else that wants to learn about finance.
That’s right. This blog is for high-income professionals. There are hundreds of financial blogs out there for the other 98%. Let me know if you need a referral to one. Here’s one of my favorites:
https://www.mrmoneymustache.com/
And no, I’m not a licensed financial advisor as noted in the disclaimer link on every page of the site and on the about page.
Have a nice life, thanks for the great comment.
@KB Mr Money Mustache is not for the 98%, its for everyone. Other financial blogs that are for everyone and really good:
mymoneywizard.com
gocurrycracker.com
Financial Blogs that are not for everyone, brake the first law of finance, so basically are worthless.
Love Life, Live Life, and Trade It! RLT
[Ad hominem attack deleted. Sorry, the first amendment doesn’t apply in my living room.]
Soo. I like this article and I need to defend myself against pulling a life insurance policy on myself, for my children from my never married ex. Either she is planning to kill me or use my children as a way to make money either way, I need a few really good valid reasons why it is stupied. I am currently almost considering bankruptcy, the children qualify for Medicaid, I am remarried with a total of 6 children. Her lawyer specializes in personal injuries and I think he has lost his mind. Thanks for help ahead of time
I have no idea what you are asking for, but if you are considering bankruptcy it doesn’t sound like you can afford the premiums on a whole life policy.
I have seen policies on children for $4M, so children can have “high” life insurance. Also, the rider that allows you to upgrade 9 times is a thing. 529 affects the chances of you receiving grants or scholarships. if your kid doesn’t go to school and you have no other kids in your family you get penalties. Life insurance for children isn’t bad, but shouldn’t be your end all be all. I know someone who his parents got a life insurance for him and he became uninsurable and is still able to increase every several (atleast a bit) as an adult.
Yes, I’m late to the thread.
Could not agree more, this is dead on.
I haven’t bought life insurance for my kids and I don’t have one either. My wife has a tiny one, ironically with a small buy more rider from childhood. Still I don’t suspect it’s so small I don’t count on it for anything. The ironic thing is when I was born for a brief time my father sold life insurance door to door. And yet they didn’t buy whole life for me, what does that tell you?
We bought whole life for our kids at a young age, with riders that allow the. To purchase more insurance at various points without exam, qualifying etc. now that they are adults we keep paying premium to make sure their family has some life insurance. Their families are of limited
Means at this young age and we want to make sure they have at least some protection. Might. It be the highest return but a small amount of money to sleep a little better at night
What is the policy? How large is the future purchase option and what does that rider cost on your policy?
NEVEE PURCHASE THE CHILDRENS TERM RIDER ON AN EXISTING POLICY. If you want to protect your children it is best to purchase them their own seperate policy. It costs the same, the policies won’t overlap and there is much less red tape.
In the past 6 months, I have run into two examples in which my young clients have been deemed medically ineligible for life insurance. Both individuals’ parents purchased whole life insurance policies on them at birth – one with MassMutual, the other with State Farm.
The husband/father with the State Farm policy does not have a Guaranteed Insurability Rider on his policy, and so the $75,000 face amount is all the life insurance he can get (this amount will grow modestly over time as policy dividends purchase paid up additions which will produce more benefit). In my opinion and in his, this is better than nothing, and his parents’ purchase was worthwhile.
The husband/soon to be father with the MassMutual policy does have “GIR” and he is eligible to purchase $100,000 of permanent life insurance, no medical questions asked, every 3 years. Upon a “significant life event” (we utilized this after his wedding), he can purchase an additional $50,000.
He and his wife are thankful to have this insurance and the ever-accumulating cash value that they can withdraw tax free at any time.
Juvenile insurance is like any other insurance product – you pray it ends up being a waste of money. But, if life does take an unexpected turn, you’re really glad to have it. Don’t purchase a juvie policy with the expectation of your child dying…purchase it with the expectation of them living long and happy lives
Purchase it with the expectation of them living long and happy lives? What is that, some kind of weird sales technique they teach in insurance agent school? That’s bizarre.
Readers should bear in mind that two bad things have to happen for a financial catastrophe in this regard. # 1- Not be insurable and # 2- Actually die before you are financially independent but while someone else depends on you. This is the issue with whole life insurance in general:
Age 0-25…30…maybe 35 for a professional married to a professional without kids: No insurance need
Age 35-maybe 40…quite possibly 50 and definitely 60: Need for insurance
Age 60 to 105: No need for insurance
It’s possibly your need for insurance could be a time period as short as 5-20 years. Paying for a policy for your entire life to cover those years is a good example of buying unnecessary insurance. You CAN insure against all kinds of things. That doesn’t mean you SHOULD.
Actually it isn’t all tax free unless it’s a loan and EVERY loan in the United States is tax free. Hopefully they don’t take loans to early otherwise they will end up like several at bogleheads with imploding policies with INCOME tax rates on even phantom gains bc of interest.
IANAL but isn’t there some sort of trademark issue with Ms. Fleischner’s website. At the bottom of the “about” page, looks like a direct lift from this site. Check it out.
No, I don’t think that’s necessarily a trademark issue as we have a business relationship (she’s a paid advertiser on the site.) The link to “white coat money” a site that has been renamed because it WAS a trademark issue is an issue though. I’d like to see her take that down.
My wife and I both make over $100k per year. We each contribute regularly to retirement accounts. I contribute 12% of my gross, and my wife contributes $4000/year. I am 41, she is 38. With approx. $275k in those accounts, I sat down with several financial advisors and explained to them that at the time of our demises, I would like to leave each of our daughters $1 million. They are 8 and 5. We both have jobs that are pensioned so that will ease our retirement burdens. How would you advise me to invest to reach my goals? Thank you.
If you want to guarantee you leave your kids exactly $1M no matter when you die, I’d consider a guaranteed universal life insurance policy. It’s about half the price of whole life insurance (although dramatically more than term).
But if I were you, I’d reexamine your goals to make sure that’s really what you want to do. I suspect if you really think about it, you’ll want to leave them the equivalent of $1M in today’s dollars or perhaps as much as is possible under most reasonable scenarios, both of which call for a different strategy and are probably best reached with a simple, boring term life + invest the difference type strategy.
I’m blown away that there’s even a single person on here attempting to justify life insurance for a child. I’ve made the assumption that anyone who regularly follows this blog and other similar ones would be more enlightened than that. Apparently, I’m wrong.
There is Pet insurance too if you want…
LOL
If my child dies, I’m not going back to work for a while. For me, I would need the income replacement.
More than your emergency fund would provide?
I think this is a case for knowing yourself. If you think the grief might keep you away from work for many months, that’s a case where it might make some sense. IE, our emergency fund is ~3-6 months on hand. If the kids died, and my wife took 3 months off of work to recover, then yes the emergency fund covered us. However, that’s cutting it really close, especially if something else popped up simultaneously.
I also suspect this is a function of specialty. My wife is a PEM dr, so she figures that it would be extra hard to return to work. Others might have different expectations. Also, 20 year term insurance, not whole life.
If a child dies, it would be a horrible experience. But, this is what an emergency fund is for. 3-6 months of expenses would mean that I could easily not work for that time if I needed that. I don’t think my job would be there when I got back, but even the extra 10K wouldn’t help with that issue.
Dan? I am with you, buddy… I am with you.
Michael? Okay, I’m a workaholic I guess… but if something happens to someone in my nuclear family, my work buddies and clients are probably the last people I’d want to disconnect with … I am very fond of these people and think I’d benefit greatly by continuing to be around them.
White Coat Investor… Your point about an emergency fund is a good one… and maybe to extend that, if someone did have a child with issues that might undermine future financial security, maybe that’s just another thing to plan for if one has been financially fortunate…
I think there are certain situations where it is at least somewhat reasonable. We get 10,000 dollars of coverage on our son for 1.50 a month. So 18 dollars a year for term life. I am in medical school, and yes the cost of a funeral could be covered by our emergency fund, but that would leave us more vulnerable for something like a car breaking down or anything else in the short term. Especially since we aren’t working with a high income at this point, so rebuilding the emergency fund would take longer than what it would take most of the regular readers. So less than 80 dollars spread out over 4 years of medical school is worth it to us. For slightly less than one tank of gas a year we can carry the insurance, and then drop it when I start residency if we care to. Maybe it is a dumb financial decision to most people here, but it is so cheap it will not affect our long term success. So in our unique situation, I think it is reasonable. We could definitely be making worse decisions.
I agree that $1.50 a month isn’t going to have a big effect on your finances. I also agree that when you have a higher income you may wish to drop even that much coverage and that it makes more sense as a med student than as an attending physician. I think it is interesting to point out how expensive your insurance is though. A $1 million 10 year level term policy on a healthy 20 year old female is $205 a year. You’re paying $18 for 1% of the coverage. In essence, per dollar of insurance, you’re paying almost 9 times as much. Doesn’t seem like much of a “deal.”
I had not really considered how “expensive” it is when you look at it relative to the cost of an adult, and the amount of coverage that normally comes with an adult policy. So that is interesting for sure. I think that is definitely a valid argument, but I don’t plan on shopping around. One of the best parts about the coverage is we didn’t have to speak to anyone trying to sell it to us or anything else. On another note, we did recently have someone try to sell us on whole life using the “it is just like a Roth” argument. Needless to say, your website saved us money and a headache, so thank you. I certainly understand why life insurance for a child isn’t worth it in the majority of cases, but I think it is reasonable for us at this point.
When I was a college senior nearly five decades ago, our dorm was swarming with life insurance agents. I wasted $250 on a $10,000 policy with lots of “sounds good” riders, funded by a loan from the insurance company. I came to my senses and cancelled when the insurance company tried to raise the interest rate a year later.
Parents – tell your college kids to JUST SAY NO.
Just curious… how did it come to be that there’s an ad for the Gerber Life Grow-Up Plan on the page for this article?
For what it’s worth, I agree with you. The only reason I would ever consider it for my own kids (none right now) is if it had a future increase option that went up to at least $1M, preferably higher.
Gotta love Google Adsense. It places ads based on the content of the page and due to your browsing habits. I can block them manually if it is a real problem.
No problem for me. I’m no more tempted to buy it with the ad than without. If anything, it’d be problem for Gerber to pay for ad space next to a trashing of their product. I just was curious if for some reason you solicited their ad, but sounds like no.
Much rather fund the kid’s Roth with usable future money than buy life insurance to support the agent’s kids.
If Mass Mutual actually offers a policy that provides an option to buy 10x more insurance regardless of any future medical conditions, the costs will be astronomical. Insurance companies never err on the adventurous side. It’s going to be equivalent to buying term life with a fifty year horizon.
I have an insurance policy on my son. It is a 25k whole life with 7 guaranteed purchase offers for additional 25k amounts. Age 17,25,28,31,34,37 and 40.
Meaning my original 25k guarantees the option for an additional 200k of whole life. We pay it for 20 years and by the time we stop paying it we have more interest and dividends paid in it then we spent on it. And by quite a lot. We stop paying the insurance at age 20 and it continues to grow in dividends and interest. The death benefit continues to grow every year and we stop paying.
Our provider is the Knights of Columbus.
-Dominik
Thanks for sharing your numbers. I’m not sure a mere $175K of FPO is really locking in insurability though.
I’m curious about your illustration as you seem to feel it will provide a solid return, which is pretty unusual for this type of a policy. If you don’t mind me asking, what is your annual premium and what is the guaranteed and projected cash value at 20 years?
No problem.
Cost is $230 a year. Guaranteed after 20y is $3289 and projected is $3772. Policy will cost $4680 by the 20 year mark.
I’d like to point out that come retirement (65yrs of age) the policy will have $27379 of interest.
If I calculate the average yearly interest rate from the 20th anniversary to the 65th anniversary of the policy.
Equation;
65th Year: $27379
20th Year: $3772
Increase of $23607 / by original number ($3772) x100= 625℅ increase. Divided by the year difference (45 years) = 13.9% yearly increase over 45 years.
Unless my math is off it sounds like decent way to invest. All the while when your child is an adult you give him the insurance and he won’t need to purchase that amount of insurance.
-Dominik
Your math is way off especially since you conveniently decided to not consider the first 20 years. Sounds like WCI is willing to review it for you. You should send him a current inforce illustration.
Now one thing that is true though is that keeping an old policy is very different then buying a new one. This is bc of front ended sunk costs and no time machine.
Dominik, your math ignores the enormous benefits of compounding. I don’t have my calculator handy, but the real compound rate of interest you earned over 45 years is around 4% per annum.
Let’s actually do the numbers. I don’t think you’re going to like what they show.
$230 per year for 20 years grows to $3289.
=RATE(20,-230,0,2389,1) = -6.76% per year as a guaranteed return
$230 per year for 20 years grows to $3,772.
=RATE(20,-230,0,3772,1) = -1.93% per year as a projected return.
I think we can pretty safely say this isn’t a good investment.
What about after the first 20 years? (The poor returns of whole life insurance are heavily front-loaded.) For the next 45 years, your projected return (remember guaranteed is less) would be:
=RATE(45,0,-3772,27379) = 4.5% per year
I’d need someone better with a financial calculator than me to give you the overall return for 65 years, but suffice to say it will be less than 4.5% and may very well be less than inflation.
Whole life insurance does not have an attractive investment return when you consider how long you are tying your money up for.
Just by way of example, let’s say you invested that $230 a year into a 529 for your kid to spend when he was 20. Let’s say you invested it aggressively and had an annualized return of 8% over that 20 years. How much would you have?
=FV(8%,20,-230,0,1) = $11,367.27, or more than 4 times as much money.
So yes, your math is off. I’m sorry. I have made the same mistake of thinking whole life provides a decent investment return.
I think the calculation ignore future contributions.
Don’t you have to pay annually to keep the policy in place?
I thought he said it was a 20 pay and then he was done.
That’s likely a loss of purchasing power over 2 decades once you consider inflation. A low cost stock index profile will likely double twice over 2 decades (4 times as much money instead of just returning to even).
Not exactly an advertisement for K of C.
By the way dividend % continue to go down for WL companies.
Rex,
I’m not entirely sure what a low stock index would net back and it is true dividends have been lowering these past few years but once the interest rates go back up so will dividends.
It fluctuates.
Yes but at 20 years even with a 50% dip, it still beats WL.
WL dividends historically lag by about 6 years so be prepared.
Also need to keep in mind that a policy purchased today will currently illustrate a lot worse then one in past. At the moment, a new “good” policy is going to illustrate about 5.5% return on the death benefit at expected death. Over all those decades the superior return of a real investment will compound.
When my child was born, I wanted to open a Roth IRA for her, but was told I couldn’t because she was under 18. Further, there are accounts for those under 18,but they have to be earning money themselves (child actor, model, paper route)
Given that time is her biggest advantage, I wanted to do this for her upon birth- even waiting until she’s old enough for a paper route (haha, like newspapers will still be in print), she would have lost several years of investment opportunities.
You talk about a ROTH for your kids. Can you please give more information on how you did this???
You can open a ROTH IRA at any age, but the child has to have “taxable compensation” to do so. The relevant IRS publication is here, under Contributions:
https://www.irs.gov/publications/p590a/ch02.html#en_US_2016_publink1000230977
So yes, the child has to have earned income. Modeling is one of the jobs a small child can do. An elementary schooler could be hired to help with filing, and some basic office work. But you are correct in thinking that these are smaller amounts, and it’s really as children get older (and particularly into their teen years) that they become more likely able to work for the larger amounts of earned income that you allude to wanting them to ROTH.
But take heart, ROTHs even from teen years on, still leave plenty of time for compounding to work its magic.
And in the meantime, use a 529 -which you can open and contribute to from birth- as a vehicle for accumulation.
(Consider when it does come time to hire your children, setting up an LLC owned only by the parents, as the vehicle for doing so. This allows you to remain exempted from child labor rules/restrictions which would occur if another entity paid them.)
They must have earned income and you can only put their earned income in it. Then you just open it at Vanguard. It also has your name on it until they’re 18, but it is not an UGMA/UTMA. It’s a Roth IRA. The hard part isn’t opening the account, it’s figuring out how your kid can legitimately earn money. But lots of kids earn money and idiotically don’t report it on their taxes. They generally wouldn’t owe anything for taxes and would then be able to use a Roth IRA. Likewise, if the parents are the only owners of an unincorporated business, they don’t have to pay payroll taxes on employees that are their children.
Parents don’t pay taxes + kids don’t pay taxes + money goes in a Roth IRA = winning combination.
Both for kids:
Have them work either for someone else or for your current business. Earned income can be placed in a Roth.
You can have kids do modeling work at a very young age. Paying maybe a couple a hundred bucks per shoot. Those pictures can be used for advertising in your business or on your blog. You get to debut their wages as a business expense and they get an income that can be placed in a Roth. Win/Win.
The work they do needs to be legitimate though. You can’t pay them to sit and watch TV.
There’s no minimum age for opening the Roth. Earned income is the harder part. The tax court specifically doesn’t want business owners (like me) just writing checks to stuff into their kid’s Roth accounts for a lifetime of tax free earnings. If you believe that Roth’s will be be around for their retirement, it’s an incredible deal because of the five decades (or more) of compounding.
In those situations, the tax court rulings have come down that somewhere around 8-9 YO is a “reasonable” age to actually earn any “earned income”. That’s just a guideline, not a legal restriction. It’s much easier to defend when it’s being paid by a third party (e.g the always popular modeling agency), but children of any age can have earned income. Aside from family business nepotism, significant earned income for kids can come from selling stuff online (Etsy, YouTube, eBay, Amazon).
Just be aware of the “Kiddie Tax Rate” before jumping into things.
So what do you do about a child life insurance policy (bought by my grandparents for my parents to have in me???) that has gone into lapsed payments? It completely seems like a waste of money for my family all these years and something that I don’t want to take over considering I have other payments and financial goals with my husband. Hate having to deal with parents poor financial choices!
Whatever you do, be sure to thank them for wanting to take care of you. The thought is wonderful even if the execution wasn’t. If it is some tiny policy, then I’d just cash it out and use it for whatever your needs are. If it is larger, you should read this post before doing anything:
https://www.whitecoatinvestor.com/how-to-dump-your-whole-life-policy/
“then put something away in a higher-returning investment inside a tax-protected account that they can use in their 20s, when they can really benefit from your help”
I’m aware that you’re probably referring to 529 or UGMA, since they probably wouldn’t want to withdraw from their ROTH in their 20s (although they could easily [although not recommended] withdraw the original contributions without penalty). Just wanted to clarify your point.
You are correct of course. I intentionally left that vague as all 3 tax-advantaged accounts are useful for different purposes and while I wouldn’t recommend the Roth IRA be used in their 20s, it could be for education, new home etc.
[Ad hominem attack deleted.]
I am 36 and tried to apply for a loan to buy my medical practice and office building. Bank turned me down because I was unable to get the $1,200,000 of life insurance needed to collateralize the loans with the banks SBA program. I have juvenile diabetes and the insurance broker I used ran me though 80 insurance companies. Best rate I could get was a table rating of 11, max coverage I could get was $500,000 with Trans America. I pay $1,000 a month for 25 year term… Yes per month. After going through this I purchased insurance for my kids in case they were unfortunately diagnosed with this familial disease. They will both have the option to buy $1m in additional insurance and never have to answer a health question. Not to mention the $500,000 of coverage on day 1. They both are whole life policies and I pay about $150_mo for them. I wish my parents or grandparents bought these for me. After draining all of my college money and taking out loans for private undergrad and med school I have about $225k of student loans that I can’t even deduct due to my AGI being too high… Long story short, it most certainly makes sense to purchase life insurance on children from reputable mutual insurance company brokers.
After doing a search on your email address and IP address, it seems more likely to me that you are a MassMutual insurance agent than a physician. I’ve also, in 6 years, never heard a physician use the phrase “table rating” on this site. Be aware that sock puppeting is not permitted on the site and neither are ad hominem attacks.
Sorry about your diabetes and expensive insurance policies. Hopefully you can become financially independent soon and drop them.
Oh you were too fast. I was going to call him out. No real physician starts off questioning your doctor skills as the start of the conversation. I also doubt his health and loan history by the way and even if it were true about the DM, his rating would have been bc he poorly controlled it and then what would that say about his doctor skills… The number of agents over the years who have done this is staggering. Sometimes I think they should be reported to mass mutual and to their state insurance commissioner.
This really should be reported. Image the lengths this person will go to with ‘clients’ if they will post this on a site like this with an identifiable address/IP. Probably a reprimand from MassMutual for not figuring out how to do it anonymously but a pat on the back for initiative! So the state insurance commissioner although if oversight is similar to that in my jurisdiction, it is the foxes watching the chicken coup.
I don’t think insurance companies care if their agents go sock puppeting/trolling random blogs on their own time.
Yes I agree. Quite the opposite, hence the pat on the back on the down low. Good initiative. How else can you sell this stuff to the masses without a degree of deception.
Well I’m not an agent. But I did buy LI on my kids. We adopted three kids, today the youngest is 19. I used Prudential, they were bought out and somebody else owns them now, good company but don’t recommend as they are not a mutual anymore. However .. my youngest turned out to be a level 5 Peanut Allergy kid .. anaphylaxis. Almost died 2X before the age of 5. Who knew. I put $700,000 on her when the adoption was finalized. Turned out to be a good decision. Today if she could be insured, she would be ‘table rated’ at a 4 (yes table ratings do exist.) We looked in to it. She has no ‘future insurability’ clause, didn’t even know about that when I did it.
My middle kid .. now 22 .. is a hard core drug user and drunk. He has $700,000 also. I have fear that that policy will pay off one day. That wasn’t my plan. He is uninsurable with his 2 DUI’s and his 3 heroin arrests. It depresses me to even think this policy might pay off in my lifetime. Beyond sad.
My oldest .. good kid. And has a nice insurance policy with great cash build up for his future.
We did this because (1) the kids are all adopted and we have no clue what their medical backgrounds are. And (2) we could afford to do it. Our thinking at the time was, it will be a gift down the road. There was no #3 reason.
No agent approached me. When you give birth, hospitals give you gift baskets with all kinds of goodies and it is full of life insurance brochures. We didn’t get one of those. I decided to do this as a ‘why not’ having no idea that for 2 of the kids, their chances of ever getting insured would fall by the wayside or be off the wall expensive.
People make all kinds of decisions for various reasons. Wealthy people make lots of decisions too. My husband and I saw no reason not to do this. Affordability was not an issue. We didn’t evaluate how much a mutual fund might or might not make. That was not our purpose and we have/had other funds for that stuff. This was for the benefit of the kids and not knowing what their futures would bring. Turns out we did a good thing but that might not be the norm for most.
Now this is me/us and our family. Your families might make different decisions. But we liked the guarantees for the future, we liked the growth being guaranteed at a minimum and if these kids live to their 60’s, this will be their retirement plans. And I retained ownership. I did not give it to the kids. So if I want to remove monies for my own retirement, that is my right. I am not transferring ownership for a long time. I’m not giving them the options to borrow out or remove money at their young ages (especially the drug kid.) However, the policies did contribute to the costs of college for two of the kids. Guess which one didn’t go to college … and guess what else. None of my kids even know they are insured. We have provisions in our living trusts to pass ownership to them when we die (except for the druggie son. He isn’t getting that privililege.)
Thanks for explaining your mindset in purchasing such large policies on small children. I think it is helpful for people to see that. At a certain level of wealth, you can spend a big chunk of your money any way you like without it affecting your ability to reach your financial goals.
A general comment in response to not just yours, but that of several others in this thread who have seen kids become uninsurable/less insurable: Data is not the plural of anecdote. The fact that your kid was one of the rare ones who got something bad that made them uninsurable doesn’t necessarily make an a priori decision to buy insurance on them a good one. The facts remain that most people are insurable at 25 or 30 and that even among those who are not they can often cobble something together and that even those who cannot probably won’t die within the period of time that insurance is needed. You have to multiply all of those probabilities together.