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Georgia toddler case: 5 Things to Know about life insurance policies for children

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ATLANTA - Policies for children represent a small fraction of the life insurance market, but they made the news this week after a court hearing for a Georgia man accused of killing his young son by leaving him in a hot car.

Testimony and court documents revealed that Justin Ross Harris and his wife had two life insurance policies for 22-month-old Cooper Harris, one for $2,000 and one for $25,000.

Prosecutors have portrayed the 33-year-old Harris as an unhappy husband who was exchanging nude photos with several women. Defence attorneys say the death was a tragic accident. Harris remains in jail charged with murder and child cruelty.

The insurance policies were mentioned among numerous details from the evidence against Harris and weren't singled out by prosecutors in their arguments.

Still, the case has drawn attention to policies that families sometimes purchase for children. Here are five things to know about the children's life insurance market.

— HOW DO THE POLICIES FOR CHILDREN WORK? The policies are typically purchased by parents, grandparents or anyone directly related to the child, according to Steve Weisbart, chief economist for the Insurance Information Institute.

Premiums paid into the policies vary according to the terms. Generally, the higher the death benefit — what's paid out to beneficiaries if the insured person dies — the greater the premium. Insurers require that anyone buying the policy have an "insurable interest" in the person covered, meaning the buyer wants the person covered to actually live.

— INSURERS ATTACH CONDITIONS TO THE DEATH BENEFIT. Insurers require documentation of how a covered individual dies, and the policies will not pay out if the beneficiary is convicted of murdering the person covered.

— POLICIES CAN BE SAVINGS DEVICES. Life insurance policies typically have a cash value while the covered person is still living, with the amount based on premiums that have been paid over time. Often, a parent or grandparent buys a policy with the intention of giving the child the option later in life of using the policy as a cash source.

— POLICIES FOR CHILDREN ARE TYPICALLY FOR LOWER BENEFITS. Policies for adults, whether purchased individually or through employers, typically offer much higher death benefits than those purchased for children. Weisbart said a $5,000 to $10,000 policy is common, amounts that would help parents pay for a funeral.

— CHILD POLICIES ARE A SMALL SLICE OF THE OVERALL LIFE INSURANCE MARKET. Weisbart estimates that life insurance policies on children represent less than 1 per cent of the overall life insurance market, both in terms of the number of polices and the dollar value.

Etti Baranoff, associate professor of insurance at Virginia Commonwealth University, added, "The nature of life insurance is to provide for economic security if the parent dies, not the other way around."

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Murphy reported from Indianapolis.

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