Things to know
- There are two ways to get life insurance for a child: a rider on a parent's policy or through a stand-alone policy.
- A medical exam may not be required.
- Parents or guardians should make sure their life insurance needs are met when considering coverage for kids.
What's children's life insurance?
Life insurance for children is the same as life insurance for adults. It pays a benefit to the beneficiary if the child dies, provided premiums have been paid.
There are generally two ways to get life insurance for kids: adding coverage to an existing life insurance policy a parent has, or through a stand-alone life insurance policy. Adding coverage to an existing policy is usually done through what's called a “rider.”
Purchasing a policy or adding coverage for a child through a rider is generally an easy process, since there may not be a medical exam.
What's a child insurance rider?
A rider is coverage added to an existing life insurance policy, usually term life insurance. It adds a benefit to a policy for an additional payment. Some term policies allow parents to add a rider covering their child or children and lasting until they reach a certain age.
Some riders can be converted to permanent coverage at that age. At that time, ownership can be transferred to the child.
Whole life insurance for children
Whole life insurance coverage is designed to last a lifetime, often with fixed premiums. Since part of the premium is held in an interest earning account, it may build cash value.
At a certain age, usually 21, the child can become the policy's owner. They can choose to keep the coverage, and some companies allow them to add coverage.
Should I get life insurance for my child?
Buying life insurance for a child usually isn't top of mind for most parents. But children's life insurance offers several advantages, including ease of purchase and a relatively low cost. It also means they have coverage that will last, even if their health changes. This is called future insurability.
Downsides to purchasing children's life insurance include low coverage limits and a lower potential rate of return than other types of interest-bearing accounts, if a whole life policy is purchased.
Pros of life insurance for children
There are several reasons to consider life insurance for a child. One is future insurability: Even if a child's health changes, they'll have coverage. Some policies allow extra coverage to be added to the policy later with a medical exam. Purchasing life insurance for a young child can also lock in a low premium rate that won't increase.
Child life insurance can also provide for burial expenses in the event of a child's death and provide a financial cushion for the parents for things like time off for grieving.
Finally, whole life insurance for a child may build cash value. A portion of the premiums will accumulate toward the cash value of a policy, and the funds can be accessed for any reason.
Reasons not to buy life insurance for kids
Policies tend to have low benefit amounts, with riders on term policies usually offering less coverage than permanent life insurance policies.
Although a whole life insurance policy may build cash value, it will be at a lower rate of return than other possible products. It should be purchased for the life insurance benefit, not for its savings potential.
Parents or guardians should consider whether their life insurance needs are met before purchasing life insurance for a child. If the parents' coverage isn't adequate, it may be better to increase their coverage before purchasing life insurance for a child.
How much is life insurance for a child?
Generally, the younger the child is when a policy is purchased, the less expensive it will be. The amount of coverage and the payment schedule will also affect the cost. The longer the payment schedule, the lower the monthly or annual premiums. Premiums can usually be paid in a lump sum or monthly, and the policy's buyer can decide the best arrangement based on their budget.
Child life insurance FAQ
Yes. For children's life insurance, the policy owner can be a parent, a grandparent or legal guardian. Grandparents may purchase life insurance for a grandchild as a gift.
But grandparents usually can't add grandchildren to their policies, unless they are the legal guardians of the child. The parents will also have to agree to the policy purchase.
Yes, but only with their permission. If you have an insurable interest in an adult child, you can purchase coverage for them. The requirement for their permission may be waived in the case of special needs children.
With a whole life policy, the younger the child is, the better. That's because the policy may build cash value as time goes on.
Sometimes life insurance can be purchased when the child is as young as a day old. With others, coverage can begin at 14 days.
It can be. Children with disabilities can be insured, but the nature of the disabilities could affect their rates. If the disabilities aren't life threatening, the price may not be affected.