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How to Maximize Your Life Insurance Policy With a Child Term Rider
There are numerous advantages to life insurance. However, often overlooked are the benefits of life insurance for children. In the following article we will highlight some of the advantages and benefits and provide our readers with some additional food for thought outside of the status quo.
What is a Child Term Rider?
Child term rider definition: when a parent takes out a life insurance policy he or she has the option of including a child term rider which extends additional life insurance coverage to all eligible children for an additional fixed premium.
The premium is the same no matter how many children it covers. Therefore, it is a huge benefit to large families with many eligible children as a parent can obtain life insurance on all children for one low price.
How Does the Child Term Rider Work?
As an additional life insurance rider to your existing policy you’ll normally start by requesting ‘units’ of $1,000 of coverage. Companies tend to offer from $1,000 of coverage up to a maximum of $25,000.
Each unit of coverage generally range from $5 to $7 each, depending on the specific carrier you choose to be insured with.
So as an example, $10,000 of coverage would cost an additional $50 annually, or a little over $4 a month.
If you have one child, that child would be included in your policy for $4 a month.
If you have 10 children, each child would have $10,000 of coverage for a total of $4 a month.
So you can see the benefit the child term rider can offer to larger households with many eligible children.
In addition to this, most child term life riders will begin once the child reaches 15 days old. The child term ends at age 18, 21 or 25 depending on the carrier and the criteria set forth in your policy.
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Benefits of Child Term Rider
In years gone by, people struggled with the concept of buying life insurance for themselves. However, this has changed in recent years and we now realize how valuable this investment to be.
Are people now likely to pay even more money for coverage to protect their children?
Well, if you’re currently sitting on the fence and not really sure of what to do, we have an extensive list of benefits for you here so you can make the right decision.
Simple Underwriting - With life insurance, underwriting can pose a huge problem because it can lead to increased premiums due to health issues or age.
However, most Child Term riders will be free from underwriting (most ask a few health questions) which means you can simply add them to your policy in no time (and with no hassle too!).
At most, you’ll have to answer some simple questions and then the policy will be up and running.
Extended Coverage - Although the majority of insurance companies have the rider come to an end at the age of 18, many look to extend this with some even reaching the mid-twenties.
If your child goes through college or even gets a job from school, this extended coverage is excellent news because you can get them started in adulthood and ensure they’re protected at the same time.
Convertible Options - Doesn’t it seem a shame to have the Child Term rider in place for at least 18 years before then watching it disappear?
Well, some providers agree because they offer a convertibility option which means the rider can be converted into a permanent policy later down the line.
In fact, this transformation can take place still utilizing the minimal underwriting which means they won’t have to worry about their health or lifestyle negating them a policy or forcing them to choose one they don’t want.
The child rider protects your kids future "insurability" by allowing them coverage down the road despite what life might throw their way.
With most insurance companies, they offer a way of converting to a maximum of five times the value of the insurance policy. Therefore, $15,000 of coverage in the rider would lead to a permanent policy of up to $75,000. As we know, this comes without medical underwriting too so it’s highly beneficial.
Of course, this might not be the policy they take forward for the rest of their lives. As they settle down and have children of their own, they’re likely to need a bigger policy with their own riders but it certainly is a great fall back plan to have available if it is needed.
Only One Required - If you have one, three, or even seven children, you’re only ever going to need one Child Term rider because this rider will cover them all.
In truth, this is probably the biggest misconception that exists because most parents who have more than one child think they need to have one rider for each child. For potentially $50 to $70 a year for coverage of $10,000, we think this is a very good deal and one you should seriously consider.
Cover Funeral Costs - In the US these days, the average funeral costs anywhere up to $10,000. If you don’t have a child rider in place, you’ll need to find this money to properly bury your kid whether it comes from your retirement fund, your savings, a gofundme campaign or even a loan.
In the past, the process of paying for an unexpected funeral has ruined the financial future and stability of many families. With this simple rider in place, the money is there if you need it, God forbid.
As we’ve already mentioned, we don’t like to think about losing a child and this is understandable. This being said, this is a simple move that ensures your financial future and helps with the emotional toll should something happen to one of your kids.
As they say, we should always hope for the best but plan for the worst and a Child Term rider follows this line of thinking.
Extra Costs - In life, there are few experiences more devastating and emotionally-draining than losing a loved one. With this in mind, the money you receive as part of the insurance package will allow you to mourn properly rather than being forced back into work immediately after.
Often, those who don’t have a child rider will be forced into going back to work whether they’re ready or not. Not only does this have a huge impact in the short-term, it also means we don’t get a chance to mourn properly and this can be very harmful to your and your family’s emotional well being.
Child Term Rider Buying Tips
As you can see, there are several benefits to choosing the Child Term rider so what do you do if you’re now interested in adding it to your policy? Below, we’ve listed some tips and considerations you need to make before going ahead and adding it.
Expiration - Before getting started, make sure you know the expiration date on the Child Term rider. While some will end at the age of 18, others will continue until they’re 25. The end of the rider depends on factors, such as if the child is a dependent, in school, in a vocation, etc.
In addition to this, some companies will put restrictions on the rider if your child were to get married, if you pass the age of 65, and other small caveats like this.
At the point of adding it to your policy, be sure to read all the small details or work with an agent who’ll guide you through the process of finding the best life insurance company for you based on your specific needs.
Amount - As we’ve seen, you can buy ‘units’ and these are normally worth $1,000 each. When adding it to your policy, this is important to remember because some people buy the rider and think this is all they need only to find they have just one unit and $1,000 of coverage.
In terms of the upper limit, most companies will stop at 25 units and, therefore, $25,000 in coverage. When it comes to the time to convert, using the ‘five times’ rule, this will give your child a $125,000 policy for their later life.
If you’ve yet to get your own policy and you plan on buying it with a child rider, be sure to scan the market for the providers who offer the child rider as well as looking towards the values.
If you’re interested in a policy where the Child Term rider value is as high as possible, look for those that go all the way up to $25,000 coverage and perhaps even beyond.
Eligibility - With each company, they have their own rules and this is important to remember. While some will draw the line at 18 years of age, others allow you to cover a child up to 25 years old.
Furthermore, some will allow you to start the policy after fifteen days while others only allow a policy to start after a number of months.
In addition to this, we should also note that there may be a handful of companies who have a different application process for step-children and adopted children.
Nowadays, the majority of companies will cover all children as long as you’re considered their parent or guardian in the eyes of the law.
Coverage - Next up, we remind you that one rider will be sufficient for all your children and that you won’t need three different riders just to cover three children. If you’re quoted $5 for $10,000 worth of coverage, this means it will be $10,000 coverage for all your children regardless of how many you have.
Shop the Market - Finally, we urge you to search the market and compare different life insurance quotes.
If you already have an insurance policy in place, it should be easy enough to contact the company and have the rider added.
If you haven't yet got a policy and you want to get the policy and the rider at the same time, be sure to compare the market for the best quotes.
If you don’t feel confident doing this, there’s nothing wrong with contacting an agent. After they learn every detail they need about you and your situation, they’ll soon find a handful of strong suggestions from which you can choose your favorite.
If you are in the market for life insurance with a child term rider we can help point you towards the companies that offer the greatest benefits and the best terms so that you can have the peace of mind knowing you secured the best policy for you---based on your unique need and situation.
So, what are you waiting for? Give us a call today or visit our Life Insurance Quotes page and see what we can do for you!