It is a financial planning tool that provides a tax advantaged savings vehicle with potential for a lifetime of benefits.
Life insurance policies for children became popular in the 19th century to pay funeral and burial costs during a time of high infant mortality.
Initially controversial, life insurance for children eventually gained broad acceptance.
[2] Mutual aid societies sponsored burial insurance policies for immigrants and religiously affiliated groups.
[3] Such groups had their origins in ancient Rome, and were similar to burial societies, common in England during the Industrial Revolution and Jewish communities since the 13th-14th centuries.
[9] The growth of the cash value inside an insurance policy in a tax-deferred environment (through guaranteed interest and credited dividends) creates lifetime saving opportunities that can be used for any purpose: to pay for college, finance the purchase of a home, establish a supplemental source of retirement income, or provide security, maintenance and support for future generations.
[7] A juvenile life insurance policy typically requires a minimum of $700 of annual premium, which provides approximately $100,000 of face value.
[11] Several insurance companies offer the option of having a portion of the return based on the performance of an equity index.
[7] The tax-free buildup of guaranteed interest and non-guaranteed dividends within an insurance policy provides a source of funds that are accessible within a week, at any time, for any purpose, and without penalty.
The eventual face value will pass to the children or grandchildren of the insured income tax-free.
In the case of larger policies, a doctor or insurance agent may have to confirm the age, sex, height, weight, and apparent healthiness of the child.
A juvenile life insurance policy in a trust may be free of estate taxes and not subject to the public and contestable probate process.
Critics also claim that investing in stocks, bonds or mutual funds can provide higher returns with lower fees than a comparable juvenile life insurance policy.
The cash value of a juvenile life insurance policy can be borrowed or withdrawn at any time.
Borrowing using the policy as the sole collateral is typically not a taxable event, although interest must be paid or accrued.