What is Jumping Juvenile Life Insurance?
Jumping juvenile life insurance is life insurance purchased for a minor with a death benefit that increases (i.e., jumps) when the insured reaches a certain age. Parents generally purchase these policies for their children.
How jumping juvenile life insurance works
Some parents want to insure their children’s lives. Juvenile life insurance policies give those parents peace of mind knowing that should the unthinkable happen, they’ll be able to comfortably cover their child’s funeral costs.
With that goal in mind, some parents add child riders to their own life insurance policies or purchase standalone juvenile life insurance. But there’s a third option that can give the parents peace of mind while increasing coverage for the child as they reach adulthood.
With a jumping juvenile life insurance policy, the parent purchases whole life insurance coverage for their child while they’re still a minor. The policy comes with a death benefit appropriately sized for an individual who doesn’t need any income replacement (namely, the child).
Jumping juvenile life insurance gets its name from the jump that occurs when the insured reaches adulthood. At a certain age (usually 21), the policy’s death benefit increases. This jump occurs without an increase in premiums or the need to submit any new evidence of insurability. In other words, the parents won’t need to pay more for the coverage and the insured won’t need to go in for a medical exam to get this increased death benefit.
That makes jumping juvenile life insurance a good way to put life insurance in place early, when it’s most affordable, and to maintain coverage even if a serious health condition arises.
Ages to know in jumping juvenile life insurance
There are a couple of age benchmarks with this type of life insurance.
Secondly, there’s the age of the death benefit jump. Again, it’s 21 for most policies.
This is the point at which the death benefit increases without any change in premiums or any additional underwriting. It’s also generally the age at which the parents can transfer ownership of the policy to the insured, should they want to do so. Whoever keeps control of the policy is responsible for paying the premiums, so it’s important that parents don’t hand a jumping juvenile policy over to a child who isn’t yet in a financial position to maintain the coverage.
Cash value in jumping juvenile policies
Because jumping juvenile life insurance is a whole life insurance product, it lasts the insured’s lifetime (or as long as they continue paying the premiums) and includes a cash value component.
The cash value functions like a savings account within the policy. It grows over time as the policy’s premiums are paid. It also grows at a steady rate of interest.
Because the policy is purchased so early in the insured’s life, it has ample time to accrue cash value. That does not mean, however, that the insurance provider will write a check in that amount to the insured at some point. Most insurance providers have specifications around how the cash value can be used. It may be usable to serve as collateral for a low-interest loan, for example. Generally, withdrawing that amount will cause the policy to lapse.