Suze Orman's Advice: Reconsider Life Insurance for Children

In the realm of financial planning, life insurance is often considered a crucial component for adults, providing a safety net for families in case of an untimely death. However, renowned financial expert Suze Orman has recently advised parents to reevaluate their decision to purchase life insurance for children, particularly in the case of a 10-year-old child. In this article, we will explore the reasons behind Orman's advice and the potential implications for parents considering life insurance for their children.

The Case for Life Insurance for Children

Life insurance for children can offer several benefits, including:

1. Financial Coverage for Final Expenses: In the unfortunate event of a child's passing, life insurance can help cover funeral expenses, medical bills, and other associated costs. This financial relief can allow families to focus on grieving rather than worrying about financial implications.
2. Guaranteed Insurability: Securing a life insurance policy for a child at a young age guarantees their insurability later in life, regardless of any health issues or occupation changes. This can be particularly beneficial if the child develops a health condition that would otherwise prevent them from obtaining affordable coverage.
3. Cash Value Accumulation: Some life insurance policies, such as whole life insurance, accumulate cash value over time. This cash value can be accessed later for various needs, such as paying for college or buying a first home. For example, the Gerber Life Grow Up® Plan doubles the death benefit at age 18, providing even more protection as the child grows.

The Case Against Life Insurance for Children

While life insurance for children can offer several benefits, it is essential to consider the potential drawbacks, as highlighted by Suze Orman:

1. Low Coverage Amounts: Some life insurance policies for children may have low coverage amounts, which might not be sufficient to cover final expenses or other financial needs in case of an untimely death. For instance, term life insurance policies typically have lower coverage limits compared to permanent life insurance.
2. Long-Term Costs: Maintaining life insurance policies for children can be a long-term financial commitment, with premiums that may increase over time. This can be a significant drawback, especially if the policy is not affordable or if the child's financial needs change.
3. Poor Rate of Return: Some life insurance policies may have a poor rate of return, especially when compared to other investment options. This can make them less attractive as a long-term financial strategy, particularly for those looking to maximize their returns.

Suze Orman's Advice: Reconsider Life Insurance for Children

In light of these potential drawbacks, Suze Orman has advised parents to reevaluate their decision to purchase life insurance for children, particularly in the case of a 10-year-old child. Orman argues that the low coverage amounts and long-term costs may not be worth the potential benefits, especially when considering the child's young age and the likelihood of developing health issues later in life.

Conclusion

While life insurance for children can offer several benefits, such as financial coverage for final expenses, guaranteed insurability, and cash value accumulation, it is essential to consider the potential drawbacks, including low coverage amounts, long-term costs, and poor rate of return. In light of these factors, financial expert Suze Orman has advised parents to reevaluate their decision to purchase life insurance for children, particularly in the case of a 10-year-old child. By weighing the pros and cons, parents can make an informed decision about whether life insurance is the right choice for their children.