Life Insurance for Children

Life insurance protects those you love and support, but it might not make financial sense to purchase a policy for your kids. Before you buy a plan, decide whether it’s the right choice for you and your family. Learn the pros and cons of life insurance for children. 

What Is Life Insurance for Children?

Life insurance for children is typically purchased by a parent or grandparent and is designed to cover the life of a minor from as young as 14 days to 18 years of age as long as the locked-in premiums are paid. As long as premiums are paid, the rate never goes up during the life of the policy. These policies are typically whole life products — permanent life insurance that builds cash value. That means a portion of the premium is paid into the policy account and grows over time. 

Life insurance provides a death benefit to the beneficiaries to use for funeral costs and other end-of-life expenses. For parents who lose a child, the death proceeds can even be used to take time off to grieve the loss without suffering financial setbacks. The coverage amounts for children’s life insurance policies are often low — under $50,000. The annual premium for a $25,000 policy for a child runs about $140 a year. When the child reaches 18 or 21 years of age, they can take over the plan and continue paying the premiums, buy more coverage or cash in the policy altogether. 

The Pros and Cons of Life Insurance for Children

Life insurance for children can be a smart investment, but it may not make sense for every family to buy a policy. Here are three factors to consider when considering life insurance for children: 

• Covers expenses in a worst-case scenario: Losing a loved one — especially a child — is painful, and you may want to take time off to grieve and recover. You could incur unexpected costs and funeral expenses, and a child life insurance lump sum can help you with burial costs, grief counseling and time off from your job or business. 
• Investment vehicle for savings and college expenses: Your adult child can withdraw funds from the cash value of this policy or borrow money against it to apply the money toward school fees, a down payment on their first home or other big life expenses. 
• Ensure future insurability: Typically, life insurance for children includes a guaranteed purchase option, which allows your child to buy additional coverage when they are older without completing a medical exam. The coverage amount and cost can vary, depending on the policy and insurer and your child may be restricted to a certain age. This option can be helpful if your child develops a preexisting condition or selects a risky career or hobby that would otherwise make buying life insurance challenging.

Life Insurance for Children Rider

If you currently have a life insurance policy for yourself, you can typically add a child rider to your plan for minimal costs. Most insurers will allow you to add a dependent child who is at least 14 days old up to 18 years of age. There is little underwriting involved, and a medical exam is not required to add a child to your existing policy. In most cases, you can add a $25,000 child rider to your plan for as little as $11 per month. 

What to Do Before You Buy Life Insurance for Children

It’s important to consider all the pros and cons before you buy life insurance for children. Review your budget, go over your current investments and look ahead at what you will need in a worst-case scenario. Remember the younger your child is when you purchase the life insurance policy, the cheaper it will be.