Child Policy Changes (For people who has child policy before January 2023)
What This Covers
Understanding how child insurance policies issued before January 2023 are affected when the child turns 17 or 18, including actuarial classifications, smoker status decisions, and long-term financial planning.
Why This Matters for Families
- These older policies classify children as “smokers” by default, which affects future growth.
- Parents are faced with an important decision that impacts both cash value and premiums.
- The choice can influence a child’s financial foundation for life, especially if loans or reinvestments are planned.
Key Insights by Section
00:00–00:45 | Setting the Stage
- Viewers are asked if they have children under 18.
- Focus is strictly on existing policies issued before January 2023.
00:45–01:29 | The Hidden Catch in Older Riders
- Children in older riders are automatically classified as smokers from an actuarial standpoint.
- When they turn 17 or 18, the parent must declare them as smoker or non-smoker, which affects the policy’s performance.
Smoker vs. Non-Smoker: The Decision Trap (stars at 01:29 mins)
- Although selecting “non-smoker” may seem obvious, it triggers a one-time cash value adjustment.
- Carriers like Equitable apply this adjustment before allowing growth to continue.
03:10–05:45 | Visualizing the Impact
- Illustrations show how electing “non-smoker” causes a temporary dip in cash value.
- Policies issued after January 2023 are unaffected by this issue.
Balancing Early vs. Future Value (starts at 6:30 mins)
- “Smoker” designation gives higher early cash value, while “non-smoker” gives higher long-term value.
- Key factors include premium stability, death benefit, and whether the family prioritizes short-term liquidity or long-term legacy.
Looking at the Numbers (starts at 11:45 mins)
- Smoker-classified policies may outperform in early years when total premium paid is considered.
- But this advantage fades over time in comparison to the non-smoker option.
The Host’s Strategy (starts at 17:27 mins)
- Host is keeping his kids classified as smokers for now.
- Strategy: delay the designation switch until adulthood—especially useful if the child takes policy loans and reinvests.
- Encouragement to avoid rushing the decision; instead, align it with your family’s unique financial vision and dynamics.