Is Life Insurance a Good Gift?
There is no better gift than peace of mind — both to yourself and to your loved ones. What better way to have peace of mind than knowing the people in your life are taken care of?
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Life insurance can provide that assurance, and it makes a practical gift for your children or grandchildren. While purchasing life insurance can conjure some sad feelings among us, doing so is an ideal way to give the people you love the future you dream of for them.
Just what are the benefits of making a gift of life insurance?
According to financial giant Merrill Lynch, life insurance provides diversification of the estate you’ll leave to loved ones, as well as financial guarantees, a competitive rate of return, tax advantages and liquidity for the person named as a beneficiary.
Taking out your own policy would help your beneficiary to achieve a number of goals. A spouse, for example, could pay off your mortgage. Your adult child could use the funds on anything you envision helping them with down the road, such as a down payment for a home. Benefits from life insurance could help send your grandchildren to college if you give them a policy as beneficiary.
Insurer USAA also said you can take out a life insurance policy in the name of your child or grandchild, provided the grandchild’s parents agree. Your gift will be ongoing as long as you continue to pay the premiums. The policy can fill a variety of needs, according to USAA. First, children rarely require any sort of medical exam or proof of insurability, giving them a policy should their health prevent them from obtaining a policy later. Also, policies can build cash value through the years. Finally, as your child or grandchild gets older, the life insurance policy provides a way to instill financial literacy.
Should you decide to make a gift of a policy to a loved one, you’ll also need to figure out which type of insurance to buy. Term life insurance policies remain in effect for a specific amount of time. Permanent life insurance builds cash value and provides coverage for life, per USAA.
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So while life insurance might not draw the same reaction from a recipient as, say, a bike or a vacation, the gift will remain long after your grandchild has outgrown the bike and the memories of that ski vacation have faded.
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This article originally appeared on GOBankingRates.com: Is Life Insurance a Good Gift?
