What You Should Know About Life Insurance (for Your Children & Grandchildren)

September 08, 2016

Have you ever wondered how to help secure the financial future of your children or grandchildren beyond college expenses?

Fewer companies are offering pensions, with the share of Fortune 500 companies that provide them to new hires falling to 24% at the end of 2013 from 60% in 1998. Only 7% of employers offer new employees traditional pensions, which pay out a certain amount at retirement based on a worker’s pay and how long they stayed with a company. (1)

As parents, we want to see our children achieve success greater than ours.  How is that possible without the benefit of traditional retirement plans?

We have all seen Gerber Life Insurance Company commercials telling us how we can help our children and grandchildren “grow-up strong.”  Most of us have wondered if that type of investment makes sense.  The type of investment being promoted in the Gerber Life commercials are life insurance policies.

Should you consider purchasing life insurance for your child or grandchild?

Whole life insurance:

  • Provides a guaranteed death benefit.
  • Offers a guaranteed premium structure, which means your premium will never increase, but may be reduced or eliminated.
  • Builds cash value that can only increase over time.
  • Some whole life insurance offers dividends. When dividends are declared, they may be credited to your policy, further increasing the cash value and death benefit. (2)

A dividend paying whole life insurance policy that you purchase today for your newborn child or grandchild could: 

  • Have a monthly premium as low as $66.69.
  • Require no more additional premium payments after ten years.
  • Have a cash value of $135,703 at your child or grandchild’s age 65.
  • Have rate of return equivalent to 4.79% on the cash value.
  • If the cash value of the policy is not withdrawn, have a potential death benefit of $282,862.
  • May have a rate of return equivalent to 6.07% on the death benefit.(3)*

This is a general description of coverage.  This analysis is provided for informational purposes only and should not be construed as a recommendation.  A complete statement of coverage is found only in the policy.  Death benefits generally pass on income tax-free to your beneficiaries.  Policy loans and interest will reduce the death benefit and cash value.  The guarantee only applies to the death benefit, is based on the claims-paying ability of the issuer and does not protect against market fluctuation.

*This rate may fluctuate depending on issuer.

The cash value is available for tax-free withdrawal to help fund the policy holder’s retirement income.  The death benefit would be payable to beneficiaries when if he/she passed away without withdrawing the cash value.

The interest rate that banks offer is their choice. Historically, online banks have offered their customers a higher savings interest rate because they have lower overhead costs — they don’t have to pay rent on their local branches.  Throughout the entire industry, however, the national average savings interest rate is only 0.17%. (4)

Make sure your retirement savings are sufficient.  It is wonderful to be generous to the next generation, but you need to secure your own future first.

If we at Kemp Harvest Financial Group can help you in any way with regard to your financial planning needs, please feel free to contact us.


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  1. http://www.washingtonpost.com/news/get-there/wp/2014/09/05/nearly-a-quarter-of-fortune-500-companies-still-offer-pensions-to-new-hires/
  2. https://www.ohionational.com/portal/site/client/whole_life_insurance/
  3. Ohio National Quotes – for specific quotes and documentation used in this blog, please contact us.
  4. http://www.gobankingrates.com/savings-account/what-average-savings-account-interest-rate/