Details of the Life Insurance Policy I Bought on My Daughter’s Life

//Details of the Life Insurance Policy I Bought on My Daughter’s Life

Details of the Life Insurance Policy I Bought on My Daughter’s Life

In my last post, I explained why I actually bought a permanent whole life insurance policy on my second child’s life, so I figured I would share the actual details of the policy itself.  If you didn’t read the last post, there are two main reasons why I purchased whole life insurance on both of my children (fuller details in the post):

  1. I am not going to work if something happens to either child and
  2. Guaranteed Insurability – I have created a policy whose death benefit can increase without medical underwriting

My Child’s Life Insurance Policy

The basics:

  • Approximately $50 a month for a current death benefit of about $132,000.
  • A permanent product rather than a term policy because the term would not allow the “not so basic” explanation to occur

I hope to God I never see that $132,000, but if something were to happen to my daughter, that is enough money to allow me to grieve in a way that I see fit (i.e. not rushing back to my desk because I have to earn my next mortgage payment).

The not so basic:

  • I included a rider that says if my daughter is ever disabled she/I do not have to pay the premium, yet the policy continues to grow normally
  • I included a rider that guarantees that she can increase her death benefit from $132,000 to $1,132,000 without medical underwriting

Growth on my Child’s Life Insurance Policy

If you were to decide to look into this type of protection, I would recommend looking at some of the larger mutual insurance companies.  Remember, hopefully this policy doesn’t pay out for 90+ Years! I want to make sure the company is likely not only to be around, but financially strong.  Some of the larger mutual companies have been around for 150+ Years (MassMutual started in 1851, Guardian started in 1860, etc.) – one can hope they’ll be around in another 100 or so.  I don’t think there is value in naming the company I used as I wouldn’t want to sway anyone other than to actually think about the financial move.

Cash Value Growth

YearCumulative OutlayCash Surrender ValueInternal Rate of Return
5$3,000$657-46.62%
10$6,000$3,782-8.60%
15$9,000$6,829-3.54%
20$12,000$11,2100.65%
25$15,000$17,4691.15%
30$18,000$26,0492.29%
65$36,595$244,7254.78%
85$36,595$760,4435.01%

 

Death Benefit Growth

YearCumulative OutlayDeath Benefit
5$3,000$134,201
10$6,000$139,152
15$9,000$145,927
20$12,000$158,548
25$15,000$176,586
30$18,000$198,475
65$36,595$519,216
85$36,595$973,704

 

First, the above numbers are not guaranteed.  But that is okay the market isn’t guaranteed either.   So, in a fantastic world, Daughter hits the age of 30 and has a family or business (or whatever else makes her happy) and I hand her a policy where she can increase the death benefit without a medical exam, with cash value of $25K (so assuming inflation cuts the value in half I’d still take a $12,500 asset from my parents) and I bought a terrible CD/Bond with an IRR of 2%+ tax deferred. Worst case scenario something happens very early on, and for about the price of a monthly cell phone bill I can spend as much time as I need with my wife and son.  This is obviously a HORRENDOUS scenario, but one where I can offload some of the financial risk (obviously not the emotional one).

 

By | 2015-06-09T00:15:12+00:00 May 29th, 2015|Life Insurance|0 Comments

About the Author:

Evan is the owner of My Journey to Millions which was started to track his journey from a broke debt ridden law school graduate to building a positive balance. Need more Evan? Follow him on Twitter, Contact him or get new posts directly to your email

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