Tuesday, May 21, 2013
By BEN McCANNA Morning Sentinel
WATERVILLE – Local insurance agents say it's not uncommon for a parent to buy life insurance for a child, an issue that has been raised recently as the investigation into toddler Ayla Reynolds' disappearance enters its third month.
The purpose of life insurance for children has emerged as an issue since Ayla's mother, Trista Reynolds, contends that she learned from state police that Ayla's father, Justin DiPietro, bought a policy on the child. Reynolds shared the information on www.aylareynolds.com, a family-run website. Ayla was 20 months old when she was reported missing Dec. 17.
Local insurance agents said the reasons for buying insurance for a child vary, but most parents don't buy a policy with an eye toward collecting a benefit if the child dies.
The lack of information about the investigation into the toddler's disappearance has raised the question on what role the insurance policy plays. State police won't confirm the existence of the policy, and DiPietro could not be reached for comment.
Covering children with life insurance policies is routine, said a senior official at the agency that regulates insurance companies and brokers in Maine.
"In fact, many group life insurance plans have dependents' coverage because children do pass away," said Tom Record, senior staff attorney for the Maine Bureau of Insurance.
Charles Reeves, a family-law attorney in Waterville, said he would never consider buying a life insurance policy on a child, but added that the existence of a policy doesn't signify something illegal in the Ayla investigation.
Three Waterville insurance brokers said last week that buying a life insurance policy for one's child is a logical and responsible thing to do.
John Fortier said he often sells cash-value policies to parents. He has policies on all his children.
That type of policy serves as a savings account.
If a child dies, the parent receives the benefit. However, that isn't the intent, he said. "No parent that I have ever known bought a life-insurance policy looking for a death benefit," he said. "They're always looking to guarantee the insurability."
Chronic illnesses such as asthma and diabetes can affect a person's eligibility for life insurance, which often hinges on whether the person has a pre-existing condition. If parents buy a policy for a child early in life, however, that coverage is guaranteed for a lifetime, as long as the premiums are paid.
Also, the earlier a person is insured, the lower the premiums will be.
Fortier said the minimum coverage he sells for a cash-value policy is $50,000. It costs about $20 a month.
As the child grows, so does the cash value of the policy. The premiums that are paid into the policy accrue compound interest, just like a savings account.
Unlike a savings account, however, the interest isn't subject to taxes until a withdrawal is made.
Doug Legg, another Waterville insurance salesman, said it’s not unusual for a parent to buy a policy on a child. He added that term policies, particularly riders to a parent’s policy, are a low-cost option for parents who don’t have a lot of money.
"The cost is very, very small," he said. "It could cost $25 per year, which covers all children in your family."
The minimum rider to a term policy is $5,000, Legg said.
Steve Bousque, another Waterville broker, said he has recently seen parents of older children buying life-insurance policies.
"College students are incurring astronomical loans these days," he said. "If parents co-sign on those loans, they will come in and buy a term policy, because otherwise they're on the hook for that child."
Morning Sentinel Staff Writer Ben McCanna can be reached at 861-9239 or at: