Protect Your Kids And Pets With Custom Insurance

By Pooja Dave AAA

What is the one thing that your kids and your pets have in common? Their ability to love you unconditionally. One of the best gifts a parent could give to their children is their financial security by way of life insurance.

Likewise, you can never repay man's best friend's love in money, but you can at least protect your pup from unexpected disaster. Pet insurance gives you the benefit of sitting back and relaxing
without the pressure of mounting vet bills. In this article, we'll explore these custom-made insurance polices and help you to determine whether they are worth buying.

Child Life Insurance
Who Can Benefit?
If your child is a six-figure-earning Hollywood star or an heir(ess) that is set to inherit an estate (which would be exposed to enormous estate taxes) then a child insurance policy should be your first priority. Purchasing an appropriate insurance policy (such a whole life policy) will protect your child and also have some cash value set aside for future use.

If you are worried that your child will be threatened by a medical or underlying genetic condition in the future, then getting a child life insurance policy now may also be a good solution. Some policies will guarantee future insurability when the kids grow into adulthood, even if they are unable to get normal life insurance due to health-related problems. While any parent hates to think of something happening to their kids, taking care of business before disaster strikes is sometimes necessary.

Policy Types
There are many individual insurance policies on children available on the market. A standard child life policy will cover your child at a younger age (this age normally varies from one insurer to another). The premium can be paid in a single lump sum or in installments. Some insurance companies sell child life insurance policies in units, where the cost of a unit amounts to $5,000. The insurance coverage for your child ranges from $2,500 to $20,000 and this protection ends at a specified age, such as when the child turns 21. When the child reaches this specified age, the term life insurance is convertible to a whole life policy. Many insurers provide the conversion to whole life for up to five times the initial coverage. Here, no health checkups or medical exams are required for the conversion, and the policy will act as a normal whole life policy and start accumulating cash value.

In case you can't afford separate insurance for your child, you can always go for a child term rider along with you policy. Basically, riders represent additional insurance coverage for a small premium and leaves your original policy intact. Child term riders work just like an individual life insurance policy where the coverage begins at a young age and continues until the specified age (21 years, for example) or the parent reaches the age of 65 (whichever is earlier). The rider offers maximum coverage up to $20,000 and also the provision of conversion to a permanent insurance plan. Here again, the conversion is done up to five times the initial coverage without the need for further medical examination.

Some child policies also offer critical illness coverage, which provides financial compensation in the event your child becomes terminally ill.

Insurers of different states come out with various versions of a child life insurance policy or a child term rider, therefore, it would be prudent to discuss your child's needs with your insurance advisor before opting for particular child insurance.

The Cons
From a practical point of view, buying insurance policies for children is often like throwing away your hard-earned money. The reason that many of these child insurance policies are inexpensive is because the average child is likely to remain strong and healthy. If your child is healthy, then the possibility of your child dying or contracting a deadly disease in the future becomes less and less. Even if your child becomes ill, all you need is health insurance not life insurance.

In general, when you take out an insurance policy for your child, you are paying for the agent's commission as well as the cost of doing insurance business. So from an investment point of view, the amount your child gets from a whole life policy that you had purchased is less than what you would get if you had used the same amount to invest wisely. Child insurance policies may not be for everyone and, in many cases, you might be better off investing that money in mutual or money market funds and reaping good returns in the future. You can also use the amount for setting up an emergency or education fund, which will also take care of your child's future. This way, you will have money available if your child is injured and you can pay their college fees from your savings. (To find out more about these topics, see Build Yourself An Emergency Fund, Investing In Your Child's Education, and The Money Market and Mutual Fund Basics Tutorials.)

Pet Insurance
Who Can Benefit?
A pet insurance policy helps you to pay for your pet's treatments, surgeries, lab fees, X-rays and more. It even protects your pets against accidental injuries and illnesses. Some policies also pay out if your pet dies or gets lost. (To read more about pets, see The Economics Of Pet Ownership.)

So if your cat is hurt, the first thing you do is visit a licensed veterinarian and pay for his or her services. Your insurance company will adjust your claim and compensate you for the medical expenses. This reimbursement is up to 80-90% of the costs, within the limits of the policy, in case of accidents and illnesses. The benefits of this policy have to be renewed every year and the premium is payable monthly.

What to Know About Your Policy
As with all insurance policies, read the fine print on pet insurance policies. Some insurers insist on applying deductibles in case of accidents or illnesses. Thus, a $50 deductible in your policy means that you have to shell out that $50 from your own pocket. However, if you are on tight budget, you can get the similar benefits for a lesser amount of coverage.

Usually insurers do not pay for vaccinations or other preventative measures, but recently some insurers have come up with riders covering vaccination and the routine care of your pets with no deductible. Much like their human caregivers, cats and dogs are also prone to cancer, and insurance companies have introduced a cancer rider for them.

Before going for pet insurance, you need to keep in mind that there will be a waiting period on illnesses and injuries after the commencement of your policy. A 14-day waiting period on illness in your policy implies that any conditions that occur during this period may not be covered by your insurance company.

Many insurers offer discounts of up to 5-10% for insurance of more than one pet. There are many policies on the market that also cover boarding costs for your pet in your absence, and also provide money to help in the recovery of your lost pet.

It is difficult to get insurance for older pets, so if you want coverage for your pet, you had better go for it when your dog is a cute healthy puppy.

There are also exclusions in your policy, like pre-existing conditions (i.e. the conditions that occurred before the policy became effective), hereditary defects, behavioral problems, breed related conditions, elective and cosmetic procedures etc., which will not covered). (To read more about policy exclusions, see Exploring Advanced Insurance Contract Fundamentals, Life Insurance Clauses Determine Your Coverage and Life Insurance Distribution And Benefits.)

Some insurance companies also provide insurance coverage to birds and exotic pets like hedgehogs, iguanas, rabbits and lizards, but these policies will cost a little bit more compared to dog/cat insurance. Overall, there are a lot of options for your pets because different insurers all over the country offer numerous benefits.

The Cons
If you are emotionally attached to you pets and consider them a cherished member of your family, then pet insurance is certainly made for you. All you need is $10-$30 from your paycheck every month to insure your pet. However, many people would prefer paying around $150 for a checkup visit, rather than paying more than $300 a year for insurance. One good alternative to purchasing insurance would be to keep your dearly loved cats and dogs well-fed and exercised, while allocating a separate contingency fund for them if you feel it's necessary.

Conclusion
Your kids and your pets are the darlings of your life and you should always guard them against unforeseen events. Obviously, insurance protects you and them following a mishap, but that doesn't necessarily mean that this type of insurance is right for everyone. Ultimately, it is about finding the right kind of insurance for your loved ones, at the right time and in the right amount.

To learn more about insurance policies, see Understand Your Insurance Contract, How Much Life Insurance Should You Carry? and Fifteen Insurance Policies You Don't Need.

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