Juvenile life insurance provides lifetime insurance coverage and tax-deferred savings. It is a permanent life insurance policy with fixed premiums, guaranteed coverage and a built-in savings component that accumulates cash value through interest and dividends. Accumulated cash value can be used to pay future premiums without future contributions. It is possible to withdraw or borrow funds from the policy without any tax liability. Cash value can be used for college, purchase of a home, retirement or any other purpose. A medical exam is typically not required and coverage is guaranteed for life, regardless of the future health of the child. The cost of insurance for a child is much less than similar coverage for an adult. Most policies also offer an option to purchase additional insurance in the future (up to $2 million), regardless of future insurability. Juvenile life insurance is also helpful for estate planning by providing for the tax-efficient transfer of wealth.
The cash value of a juvenile life insurance policy consists of the funds that have accumulated in the policy, such as interest and dividends and can be accessed at any time, for any purpose.
Juvenile life insurance is designed to accumulate cash value and provide lifetime coverage for the insured. Term life insurance provides coverage only for the fixed period stated in the policy and there is no accumulation of cash value.
The insurance company determines how much of its surplus should be distributed to policy owners in the form of annual dividends. While future dividends are not guaranteed, you can look at an insurance company's past performance as an indication of how it rewards its policy holders. You can also evaluate an insurance company's credit rating. Independent rating companies such as A.M. Best, Moody's, Standard & Poor's, and Fitch rate companies on financial strength, stability and claims-paying ability.
No. In a juvenile life insurance policy, the scheduled premium payments remain level. Premiums are the same (fixed) every year. The cash value of the policy can reduce or eliminate future out of pocket payments.
A policy owner may borrow up to the cash value of the policy, with the policy as the sole collateral for the loan. A loan allows the policy owner to have access to the cash value of the policy, while still maintaining insurance coverage. When a loan is made against a policy, the coverage amount is reduced by the amount of the loan.