This is an age in which niche products are getting more attention.
Interest rates may be rising but are still low. The demographics of the population are changing. Regulations are confusing. Growth rates for sales and revenue for the products life and health insurers still are, possibly, happy about selling, are often in the low single digits.
One way for agents and brokers to cope is to look for products that haven’t received much attention in recent years, and might sell pretty well if they just got a little more love.
One candidate: children’s life insurance.
Gerber Life Insurance Company, a unit of Nestle, has helped promote the idea of “juvenile life insurance,” and put some awareness of the concept of life insurance in the heads of small American children, by marketing its life insurance products for children heavily throughout the United States.
Some of the first conversations U.S. parents have with their children about life insurance often occur when the children notice the Gerber Life baby looking out from a Gerber Life ad.
But most other players in the sector take a low-key approach to discussing the products. Many life insurers of all sizes list “juvenile life insurance” on their product menus, but trade groups rarely rush to publish quarterly or annual juvenile life insurance market updates.
Craig Simms, the chief marketing officer at Vantis Life, a Penn Mutual unit, is responsible for helping Vantis Life market juvenile life insurance, along with the company’s other life products.
For the most part, the product “really doesn’t get a lot of attention,” Simms said in a recent interview.
One challenge is that talking about the alleged primary purpose of a life insurance policy for a child is difficult, Simms said.
The last reason most parents would consider buying a juvenile life insurance policy is the death benefit, Simms said.
“God willing, your child will never need the death benefit,” he said.
U.S. insurers sell a number of different types of juvenile life insurance, including juvenile term life, juvenile whole life, and juvenile indexed universal life policies.
Products come from a wide range of companies, including Gerber Life and many other life insurers of all sizes.
The current size of the U.S. juvenile life market is not clear.
True Blue Life Insurance says in the baby life insurance section on its website that it believes that insurers have millions of juvenile life insurance policies in force in the United States.
Babies and small children who buy the policies often can lock in coverage at very low rates without little or no medical underwriting, and the policies that cover them often come with future benefits increase and coverage purchase options.
The Gerber Life Grow-Up Plan policy, for example, comes with a built-in feature that doubles the amount of coverage in force when the child turns 18, without any change in the premium, and gives the policy owner a built-in option to buy more coverage at several points in the insured’s life.
A baby who started with $50,000 in coverage could end up $100,000 in low-priced coverage at age 18, and would be able to exercise options that could increase total coverage to $500,000, according to marketing materials posted by a Gerber Life product distributor.
Analysts from Life Happens and LIMRA teamed up to publish some survey data on how consumers see juvenile life insurance.
The survey team found that about 20% of the parents and grandparents who participated in the survey had already purchased children for their life insurance or grandchildren.
About 5% of the survey participants who were parents or grandparents said they were very or extremely likely to buy juvenile life insurance in the coming year, and another 21% said they were “somewhat or slightly likely.”
The participants with highest propensity to buy in the next year were parents under the age of 25: About 25% of the participants in that category said they were very or extremely likely to buy coverage in the next 12 months.
Interest in buying juvenile life insurance was comparable for parents and grandparents in different income categories.
The insurers and agents that offer juvenile life insurance say that, today, the possibility that families may need the death benefit to pay costs related to the death of a child is usually a minor consideration when families are considering the purchase of a juvenile life policy.
Agents offering the products, and life insurers selling the products through the web, or through direct mail, emphasize that the main reason for typical families to consider the product is to insure the ability of the child to buy life insurance later in life.
Families may also buy the product to:
- Serve as an alternative to U.S. savings bonds.
- Make use of the parent’s or grandparent’s gift tax exclusion amount.
- Create a vehicle the child can use to save for college without increasing the family asset totals used in college financial aid calculations.
Some financial professionals have built offering juvenile life insurance into their standard services menu.
Abbott Solutions Inc., for example, is a New York-based financial planning firm that talks on its website about using juvenile life insurance in estate planning arrangements.
The Big Obstacle
For the insurers and agents in the juvenile life market, horror at the thought of the death of a child is one challenge.
Another challenge is occasional reports of parents who kill their children to collect the life insurance death benefits. In 2014, for example, prosecutors noted when they were prosecuting a Georgia man accused of killing his 22-month-old son that life insurance policies covering the son could pay $27,000 in death benefits.
Many financial planners who are skeptical about the value of whole life insurance are also skeptical about the value of juvenile life insurance for the typical family, or typical mass affluent family. Neal Frankle, for example, a planner, has written on his Wealth Pilgrim blog that he believes the recent changes in the federal estate tax rules make any tax breaks related to juvenile life insurance less relevant than ever.
How to Sell It
Simms said he thinks of life insurance for children as something that’s good for a new agent to sell, or something that a life insurer can to sell through the web when it’s first starting to sell coverage online.
Offering juvenile life as “insurance for insurability” is a good way for a new agent to start a conversation with parents, Simms said.
Generation Z Insurance Awareness
Today’s children are all in the post-Millennial generation sometimes called “Generation Z,” or “the iGeneration,” or in the yet-to-be named generation that will come after Generation Z.
Vantis Life offers term life for the youngest children.
Whole life is available once babies are 15 days old.
Simms believes that, on principle, agents and brokers should do what they can to make sure that area schools include information about insurance, including life insurance, in any financial literacy classes they offer.
But successful efforts to use juvenile life transactions to get children interested in life insurance are rare, and it’s unusual even for the kinds of children who want to be Warren Buffett when they grow up to take much interest in life insurance, Simms said.
“Most kids have no clue,” Simms said. “Investing is much more exciting than life insurance.”
CORRECTION: The minimum age for whole life insurance was given incorrectly in an earlier version of this article. The minimum purchase age is 15 days.
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