December 10, 2011 by Milton Jones
Over my 40-something-year career, I recall several instances where a parent or grandparent made a gift of insurance. Perhaps it was a gift of life insurance on a young child, designed to encourage college money accumulation. Perhaps the bride’s father gave a gift of the first annual premium for life insurance on his new son-in-law.
“Well,” the bridegroom may say, “that’s not exactly my idea of a gift. I didn’t know I wanted insurance in the first place!”
A mentor of mine was fond of saying that life insurance was a gift with no immediate gratification – you couldn’t wear it, drive it, eat it, or even run across it barefoot. But it may turn out to be your most valuable property.
So little Annie has grown up, Sandy is just a fond memory, it’s six weeks after the wedding and Oliver Warbucks is pondering what kind of gift will be most appropriate. Of course, the couple would appreciate money. The color of money never clashes with what you’re wearing. But old Oliver suspects that perhaps the wedding should have been of the “shotgun” variety, and thinks the groom was not nearly good enough.
So Daddy Warbucks says, “Son, you’re going to be very valuable to this family, and I want to give you two a very special gift.”
Daddy buys son-in-law a $100,000 Universal Life policy and makes a gift of the $1,000 as the first annual premium. Of course, son-in-law has to consent by signing the application. Annie signs as “owner” of the policy. The policy will be Annie’s property. Daddy is hedging his bets. It is more blessed to give than to receive.
The $1,000 could have bought a lot more insurance, but Daddy wants a cash-cushion in case the couple is irresponsible and fails to pay some future premiums. He knows that, 20 years out, the cash value will look good for the grandkids’ college money .
Here’s a true story, without the true names. Some years back, I was in the home of a client couple. “Jerry” was telling me of the recent tragic death of his new son-in-law. Jerry and Jo Ann had welcomed Joe as a member of the family. He had been killed a few weeks after the wedding in a freak accident. As there was no life insurance, the family had the added burden of paying for his final arrangements and continuing to support their daughter, who had been widowed. Joe had been offered life insurance by his Auto Insurance Agent, but had not bought it. In hindsight, Jerry would have paid the first year’s premium … as a gift.
Sometimes a Daddy Warbucks will take out a medical insurance policy on “Little Annie” who is struggling through college.
Or sometimes a grandparent will gift small life policies on his grandchildren. Not a bad way to plant seeds of future financial security.
Last but not least, policies such as those described can be a cash resource during hard times, assuming we ever have any.
“And may all your Christmases be white.”