There are a few reasons why it is important to purchase a life insurance policy for your child. Although many people think of life insurance in terms of leaving an inheritance behind, that is really a side-issue and life insurance has practical applications that would be excellent for children, including the potential for a nest egg after the child is grown.
If your child were to die, the cost of a funeral could be a huge financial obstacle. Funeral costs can run in the thousands of dollars, and that's an expense you would have to deal with at the same time as coming to grips with the loss of a child. Without a life insurance policy for your child, though, the costs of burial and other final expenses would have to be paid out of pocket. With a life insurance policy, final expenses do not have to be another problem you have to deal with during emotionally turbulent times.
Whole life insurance is much cheaper to buy for a child than for an adult. Because the rates are based on the expected lifespan of the insured, life insurance for children is much less expensive than it would be later in life. Furthermore, since a whole or universal life insurance policy has a financial tool built in, in the form of a savings account, the policy would continue to accrue funds while the child matured. By the time that child is grown and ready to start a family of her own, the money built up in her life insurance policy could easily be used as a down payment on a home of her own.
Having a life insurance policy for yourself is important; because it makes sure that your family is provided for if you can't be there with them. For children the policy is no less important, and purchasing a policy on a child costs far less than buying the same policy for an adult, plus the added benefits of savings and accrued money. In fact, the gift of a life insurance for a young child is possibly one of the best gifts you could give because it will be there for the child for many years and can help overcome many of the financial obstacles life throws at them.