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Life Insurance for Children
Buying life insurance for a child might seem morbid, but people do it for several reasons—some of which have nothing to do with death.
Purchasing life insurance for children can also be more complicated than buying life insurance for yourself or another adult. For example, you might run into issues with consent, since people under age 18 can’t give legal permission for a policy. And you won't have nearly as many policy options as you would if you were buying coverage for yourself.
Before you take out a life insurance policy on the young person in your life, here’s how to decide if your child actually needs life insurance—and what you need to know about buying it.
Does my child need life insurance?
Do children need life insurance? Whether you should buy a policy for your child or grandchild depends on your goals and situation.
Chances are, you won’t be trying to replace lost income or pay off debts, because children rarely have either. Instead, you might buy a policy to help kickstart your child’s future financial health.
Reasons to buy life insurance for a child
Life insurance can help your child start their adult life with the following financial advantages:
- Guaranteed insurability: Some children develop health issues later in life that make finding life insurance challenging and expensive. But if you buy a permanent policy for a young, healthy child now, you could secure a lifetime of coverage regardless of the child’s future health.
- A savings vehicle: The cash value of a life insurance policy could be used as a savings vehicle for a young adult to spend on college tuition, a wedding, or buying a home. But parents and grandparents should know that withdrawing this cash value for such expenses may come with tax consequences for your child.
- Funeral expenses and time to grieve: The death of a child is often unexpected and always devastating. It might be difficult for parents even to consider the cost of a funeral or work sabbatical, and life insurance can remove that burden from the child's family.
- Income replacement: Although it’s rare, some children do produce income for their families. But unless your child is an actor, model, or prodigal musician, it’s unlikely this income would significantly affect your finances.
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Reasons not to buy life insurance for a child
Unfortunately, life insurance isn’t necessarily the best way to kickstart a child’s future for the following reasons:
- Low return on investment: If you want to use the policy’s cash value as a savings vehicle—say, to pay for college— the slow, steady growth of this account may disappoint you. You’d likely see a higher return if you invested the money in a 529 account or other investment vehicle instead.
- Limited payouts: Most life insurance policies for children have small death benefits, typically $100,000 or less. If you want to cover only funeral expenses, this amount could be plenty. But if you want to provide lifelong coverage for the child, $100,000 probably isn’t enough.
- Low risk of death: In the US, for every 100,000 children, only 89 will die before age 19.1 While no parent wants their child to be one of those 89, the chances that you’ll ever receive a death benefit for your child are tiny.
If you want to purchase life insurance for a minor, you should know that the process will be different than buying an adult policy. The underwriting process, rules, and age limits may be unfamiliar, even if you’ve been through the process of buying life insurance for yourself.
Child life insurance underwriting
Generally speaking, the underwriting process for children is much less rigorous than underwriting for adults. The reason for this difference is that, statistically, children are much less likely to pass away than adults. Children won’t typically have to take a medical exam, for instance. And, with some policies, you won’t even have to answer a medical questionnaire about the child’s health.
Insurable interest for children
Whenever you buy a life insurance policy on someone other than yourself, you must have a legitimate reason (called insurable interest).
If you’re buying life insurance for your own child, insurable interest is easy to prove. Any final expenses would come out of your pocket, and you may miss a significant amount of work while grieving.
If you’re buying life insurance on your grandchild or someone else’s child, however, you’ll need consent from the child’s parent or guardian. Minors can’t legally give consent until they turn 18.
Age limits for child life insurance
Many insurers will approve a policy on a child as young as 7 days old, while the latest you can buy a child policy is commonly between 14 and 18 years of age. Child coverage usually lasts until age 18 or 21, at which time you may have to convert the policy to adult coverage. Converted coverage may have a different death benefit, premium, or both, depending on the insurer.
Parents typically have two options when buying life insurance for children: a standalone whole life policy and a term-life rider attached to an adult policy. Let’s go over why you might choose each.
Whole life insurance for children
Whole life is designed to cover a person for their entire life, so it may be ideal if your purpose is to guarantee future insurability. Because whole life also comes with a savings component, called a cash value, it’s probably the right choice if you’re looking to fund future expenses such as college tuition, a down payment on a home, or a wedding.
To take advantage of the lifelong coverage of this policy, your child may need to convert the policy to an adult policy offered by the insurance company at age 18 or 21. When they do, the premiums may increase.
The best-known whole life insurance for kids is probably Gerber Grow Up, which is sold by the same company that makes baby food. But plenty of other life insurance companies offer this coverage, too.
Child term life insurance rider
If you’re looking for the least expensive coverage option for your children and you need coverage for yourself as well, you may be able to add a child rider (also known as a child term rider) to your life insurance policy.
Child riders typically cost only a few dollars per month and cover all of your children under a single premium, making it a sweet deal if you have several kids. The coverage provided under a child rider is usually term life insurance, which means your child will grow out of coverage, probably at age 18 or 21. Some insurers may allow you to convert to permanent coverage at this time, but many won’t.
Unfortunately, if you want to end your coverage or your term ends while your children are still growing up, you'll lose this rider. And if you're looking for a life insurance product that also contains a savings vehicle, this policy won't cut it.
Still, if this is the right coverage for you, you won’t have a hard time finding it. Many insurance companies offer child riders, so if you already have a policy, you may be able to add coverage for your child after a quick phone call.
If you don't already have life insurance for yourself, make sure the companies on your shortlist offer a child-rider option. You might have to ask a licensed agent if a company provides this coverage since a lot of insurers don’t list riders on their websites.
Best life insurance for children
The best policy for children depends on your situation and goals. Whole life is more expensive but can provide lifetime coverage and savings. A child term rider is much cheaper and can cover several children, but you’ll need to have an active policy for yourself to choose this type of coverage.
The best companies have top financial ratings, excellent customer service, and a clean claims record. Check out these companies that offer child life insurance riders or stand-alone policies:
If you're still on the fence about getting life insurance for your child, talk to an independent agent. They can answer questions and help you decide what's best for your family.
Bottom line: Raising kids is expensive, so life insurance premiums may not be a high priority for your family budget. And that’s OK. But it never hurts to understand your options.
Life insurance for children FAQ
Yes, but you probably shouldn’t. Legally, a minor can’t receive a life insurance payout. And even if they could, plenty of parents have concerns about whether a young person would use that money responsibly.
If you designate a minor as a beneficiary, the proceeds will likely go to the child's legal guardian, which may be your spouse (or ex-spouse). Instead, consider creating a trust to designate your beneficiary. The funds can stay in the trust until your child reaches a specific age, such as 18 or 21, and you can designate a trusted adult to watch over the account until then.
These terms can be used interchangeably in most cases. Insurers may call policies that cover minors either child or juvenile life insurance, depending on their preference.
1. Child Trends, “Infant, Child, and Teen Mortality”