Adding a Granchild to Child Rider

[lmt125]

Came across this recently, can a grandparent add a grandchild to the child rider of a life insurance policy? The grandparent is in the process of becoming the legal guardian but that is not yet the case.

Thanks.

 

[InsuranceMonkey]

Underwriter here - Depends on the company guidelines you're writing with, and guidelines for something like this are internal so you'll have to ask.

1) The grandparents are CURRENTLY legal guardians - no problem. "In the process" is not yet legal (Hypothetically, it may be denied.) so it won't fly.

2) With the children's legal guardians(parents, typically) signing off on the child rider/app, some companies will allow.

 

[lmt125]

Welcome to the forum! It's awesome to have an underwriter.

1) Is what I thought.

2) How does a parent sign off on the child rider?

I will contact the company I'm doing this with to see what they say, if anything I can always add the grandchild once the grandparent is the legal guardian.

 

[InsuranceMonkey]

2) How does a parent sign off on the child rider?

A child rider usually involves a seperate form where you note the name, SSN, age, build, medical history, ect... and at the bottom you collect the parent/guardian signatures. Parent/guardians here would sign off aknowledging that insurance is being taken out on their child and they approve of this action.

Back in the late 90's and the .com bubble, I used to see Grandparents buying VUL policies on the grandchildren, being the payor and the parents the owner/bene. It was, at the time, a great gifting use of the VUL which was red-hot in that economic market. Because of the cheap COI on kids, it would make some pretty big face amounts so it didn't MEC out. Was a commission rich enviroment for Agents.

 

[lmt125]

Thanks for the info, I'll see if they want to do that or just wait until they're the guardian to add them to the child rider.

Personally I don't believe in those children policies, I'm ok with a child rider as usually it's just like 5 a month and covers all the kids just in case. The parent or grandparent would be better off putting that money in their own policies for more cash value or death benefit, just my opinion.

 

[InsuranceMonkey]

The times have certainly changed. Most child policies I see now are in the 50k-100k zone which is acceptable. There are some very real costs to a childs death. Final hospital bills can be 10's of thousands if it was cancer or an extended death.(no health ins? Cha-ching, add another zero.) Burial is never cheap. The parents may want to take a month or two off work to grieve. (and bills still need to be paid if they're hourly workers) Family grief counceling can add up quickly... there's some very real costs that can hit 50k easily.

True story. I once worked with an Agent who had 3 young boys. He, his wife and boys were on family vacation and while driving, the boys were messing around in the back seat, he got distracted, major auto accident. Because the boys were messing around they had their seat belts off, all three were killed in the crash. The Agent and his wife ended up taking 6 months off work to get their heads and hearts back together. I don't know the specifics, but I do know he had 3 small life policies on the boys, that was probably the only reason he and his wife were able to take a chunk of time off to try and pull their lives back together again. Beyond a rider, a small childrens policy makes very real sense.

 

[VolAgent]

The guy who taught me insurance made his living selling VULs on his friends' kids back in the late 80s and through the 90s.

Fortunately he didn't have a death claim until just a few years ago. The last time we talked about in 2011, all the policies were doing well as he had made sure they were flush with cash from the start.

I'm not sure what the parents did with the policies, if they gave them to the kid or kept them, but I'm sure they are all happy with the accumulated cash.

He also told me of a similar story. An agent he had trained had sold a policy to some parents for their kids. Unfortunately one of the children died. In their case, they were so overcome with grief, they never could do anything with the money.