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Insuring Minors

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Life insurance policies for Minors

Does it make sense?

Usually, when we think of purchasing life insurance, we picture a sole bread-winner or a spouse.  There is life insurance for minors and in some rare cases, it might make sense.  Let look at situations where life insurance on minors makes sense and what the parameters might be.

The first law of life insurance is there needs to be a vested interest in the life of the person being insured.  This means that I cannot take out a policy on my neighbor (unless of course, she's my spouse and we have a really strange relationship).  This might work in the world of Big Love, but for most people, life insurance is usually within a family or structured around business uses.  Life insurance for minors are subject to this same litmus test. 

The common reason for life insurance is to offset lost income or pay down debts/expenses.  Based on this, there are only two apparent needs for purchasing life insurance on a minor.  One is that the minor has income and we're not talking the paper route.  A child star might be an example but this is pretty uncommon.  In this case, the family is probably financially dependent on their minor child.  The life insurance company may request the basis for the proposed insurance especially for larger amounts of term life insurance coverage.  On the flip side, it's hard to see how minors would have assets or debts unless they were especially precocious.  It might make sense to provide the equivalent of final expense for minors in spite of the depressing thought of it.  This would provide a smaller term life benefit to provide for potential (though unlikely) funeral expenses, travelling, lodging, etc that results from the death of a minor.  This use of term life is pretty rare and probably falls under the category of over-insurance.  Can you believe you just heard that coming from a life insurance agent?  Again, life insurance is about peace of mind so if this type of insurance on a minor makes you sleep better at night, then by all means. 

Let's look at some of the parameters of minor life insurance.  In most states, up to a certain age (around 14 on average), a minor can cancel a policy and receive part of the premium back since the contract was entered in on their behalf.  The legal age as it pertains to entering into a contract between a minor and a life insurance company resulted from this ability to back out.  The beneficiary usually has to be a close relative.

Due to HIPAA privacy laws and other protections of privacy, the minor applicant will usually have to authorize other documents such as request for medical records, MIB (Medical Information Board), and FCRA (Fair Credit Reporting Act) authorizations. 

What's our take on life insurance for minors.  The occurrences that merit such coverage are usually very unique and rare.  Usually, the situation is so unique that it demands life insurance such as with the child star scenario mentioned above.  There's only so many young Michael Jackson's so we feel that life insurance premium is better spent where the real risk of financial catastrophes can be found...the primary earners for a family.





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