Family & generations

A Gift That Can Span Generations

When grandparents think about building a lasting financial legacy, the conversation often centers around investments, education funds, or simply leaving assets to their children. But there is another strategy that can be worth considering: purchasing permanent life insurance on a child at a very young age.

Done properly, this can turn a relatively modest commitment made by one generation into a financial resource that potentially benefits multiple generations.

Start Early, Think Long Term

One of the biggest advantages of purchasing permanent life insurance for a child is time.

A child who is insured at a very young age may qualify for coverage at a relatively low cost because of their age and health. With a permanent policy, the coverage is designed to remain in place for life, provided the policy is properly funded and maintained.

Unlike term insurance, which is generally designed to provide protection for a specific period, permanent insurance can remain in force for decades. That long time horizon can also allow cash value to accumulate within certain types of policies.

Grandparents Can Fund the Foundation

An especially interesting strategy is for grandparents to pay the premiums while the child is young.

The child may receive the benefit of permanent insurance without having to bear the initial financial responsibility. Over time, the policy can become an asset that the child can potentially maintain, manage, or eventually pass on as part of their own estate planning.

The grandparents are essentially using today’s dollars to establish a financial foundation that could remain relevant for the child’s entire lifetime.

Where the Next Generation Comes In

The real power of this strategy is its potential to extend beyond the child.

Consider a simple example:

Grandparents establish and fund a permanent life insurance policy on their child. Decades later, the child owns or controls an established policy with a death benefit and potentially accumulated cash value. When the child eventually dies, the policy’s death benefit can provide a significant financial benefit to the next generation.

In this way, the original contribution made by the grandparents can potentially become part of a much larger multigenerational wealth strategy.

It Isn’t Just About the Death Benefit

Permanent life insurance can provide more than a future death benefit.

Depending on the policy, cash value may accumulate on a tax-deferred basis and may potentially be accessed during the insured’s lifetime, subject to the policy’s terms, loans, withdrawals, fees, and tax considerations.

That flexibility can make the policy potentially useful for several stages of life—whether for financial security, supplemental liquidity, or estate planning.

But It Shouldn’t Be Viewed as a Replacement for Investing

Permanent life insurance isn’t automatically the best place for every dollar.

Families should first consider their broader financial priorities, including emergency savings, retirement funding, education planning, and other investments. A permanent policy also has costs, and its financial performance can vary significantly depending on the type of policy and how it is funded.

Whole life, universal life, indexed universal life, and variable universal life have very different characteristics. Policy design matters.

The objective should therefore not be simply to “buy insurance for the child.” The objective should be to determine whether permanent insurance fits into the family’s overall financial and estate strategy.

Building a Legacy With Time

Perhaps the most compelling aspect of this approach is the power of time.

A financial commitment made when a child is five years old can remain in place when that child is 25, 45, or 75. What begins as a policy paid for by grandparents can eventually become an asset managed by the child and potentially a source of financial protection or inheritance for grandchildren.

For families who are thinking beyond their own lifetime, permanent life insurance can be more than insurance—it can be a tool for creating continuity between generations.

The goal isn’t simply to transfer money after death. It is to thoughtfully establish financial resources today that have the potential to benefit children, grandchildren, and future generations tomorrow.