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Life insurance for children

You can insure your kids at an early age — but it's not always a sound investment.

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A life insurance policy can cover your kids when they’re little and provide protection throughout their life. But since most parents don’t rely on their children financially, it’s often an unnecessary expense — and a 529 plan might be a better option.

What is life insurance for children?

A life insurance policy for children works just like it does for adults. If a child dies while insured, their beneficiary receives a payout from the insurance company.

Most policies marketed for children are whole life policies. These offer lifelong coverage and build cash value over time, and your children may have the option to take over payments or choose a new beneficiary when they’re older.

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Should I buy life insurance for my child?

It depends. Buying a life insurance policy for your child might make financial sense in these situations:

  • Your child is a breadwinner, and your family would suffer financially if they died prematurely.
  • You have multiple investments in your child’s name.
  • Your child is sick, and you want to protect their insurability.
  • You’d like to lock in cheap premiums while your child is young.

The main reasons to buy life insurance for kids

These are the key motivators behind parents’ decision to buy coverage for their children:

  • Future protection. As long as the premiums are paid, a permanent life insurance policy can continue to be active well into your child’s adulthood. So, even if your child is sick, they’ll have protection without having to take a medical exam in the future and risk being denied due to health problems. But for most healthy children, this isn’t necessary – and it can be an expensive guarantee.
  • Secures premiums for the future. Taking out a permanent life insurance policy can ensure that your child will not only have a policy in the future but at the same premium rate, instead of higher costs due to health problems.
  • Potential savings. If you choose a policy that accumulates cash value, you can borrow against it to pay for school or other future needs. But you’ll need to pay the money back to preserve the death benefit, and there are less expensive and less risky savings products you could use instead.
  • Burial expenses. In the event of the child’s death, the coverage would pay out benefits that could be used for end-of-life costs.
  • Income during bereavement. A policy could supplement income if your child dies, and you need to take time away from work during the grieving process.

Protecting your child’s insurability

This is industry speak for making sure your child will always be able to get life insurance. Unless your child has a health condition that will make it harder for them to buy coverage as an adult, you don’t need to worry about protecting their insurability. What’s more, young, healthy adults in their 20s and 30s can often access cheap life insurance rates.

However, if you have a family history of genetic illnesses that develop throughout childhood, you might want to purchase a policy for your child now. That way, you can lock in coverage for their entire life without them having to take a medical exam.

Who can a child policy cover?

Typically, policies will cover any children of a certain age range who are legally dependent on you, including:

  • Biological children
  • Adoptive children
  • Step children
  • Children you have legal guardianship over

    How do I buy child life insurance plans?

    These are the two ways you can get life insurance on your child:

    • Purchase a standalone policy. Most major insurers sell whole life insurance for children, and some — like Gerber — specialize in the product. You can choose the coverage amounts and add on available riders. If the unthinkable happens and your child passes away, the policy will pay out a guaranteed death benefit.
    • Buy a child term rider. You can add this rider to your own term life insurance policy to protect your children. Also known as a child protection rider, it pays out a death benefit if your child dies prematurely. It can cover multiple children under the same flat fee, and the coverage is usually capped at small amounts between $1,000 and $25,000. Typically, you can add this rider to your policy when your child is between 15 days and 18 years old. However, a young child’s odds of passing away within the next 20 years is less than 1% — so it’s likely your child will outlive a child protection rider.

    Pros and cons

    Pros

    • May cover multiple children. Depending on the insurance provider, you may be able to secure coverage for multiple children.
    • No medical exam. Your child likely won’t have to take a medical exam to get coverage.
    • Conversion to a permanent plan. Some providers allow for the child life coverage to convert to a permanent plan once your term child protection rider ends or the child reaches a certain age.
    • Savings opportunity. Similarly to the conversion, insurance providers may offer the ability to use the rider as a type of savings for college in the event that the plan is outlived.
    • Inexpensive costs. If you purchase a child term rider, it’s generally an inexpensive addition to your monthly premium. Depending on how many children you want to cover and which coverage amount you choose you could see rates as low as an extra $2.00 per month for a child term rider on group coverage.

    Cons

    • Value. The college-savings component doesn’t usually include any sort of interest, so it may not be the best savings account investment.
    • Coverage amounts. You’ll likely only find small coverage amounts, usually up to $50,000. Your child may be able to purchase additional coverage after a certain age, but that will depend on the insurer.
    • Age restrictions. You may be faced with an age restriction for either yourself or your child. Check with each company you’re comparing to confirm what the minimum and maximum age requirements are.
    • Eligibility. Though there are often no medical exams, it’s important to carefully read over any underwriting criteria and speak with the insurance provider to confirm your child’s eligibility.

    How childcare costs factor into your life insurance

    Compare life insurance for children

    Name Product Issue age Minimum Coverage Maximum Coverage Term Lengths Medical Exam Required
    Sproutt
    18 - 60 years old
    $50,000
    $10,000,000
    5, 10, 15, 20, 25 and 30 years
    No
    This life insurance broker combines technology and the human touch to match you with a policy tailored to your needs.
    Bestow
    21 - 54 years old
    $50,000
    $1,000,000
    10 or 20 years
    No
    Affordable 10- and 20-year term life insurance policies with instant quotes and no medical exams.
    Policygenius
    18 - 85 years old
    $50,000
    $10,000,000
    10, 15, 20, 25, 30 years
    Depends on provider and policy
    Compare affordable quotes from 12+ A-rated life insurance companies side-by-side.
    Everyday Life
    20 - 75 years old
    $100,000
    $10,000,000
    10, 15, 20, 25 or 30 years
    No
    Build a customized laddering strategy to target specific financial responsibilities and save on term life.
    Fabric
    25 - 60 years old
    $100,000
    $5,000,000
    10, 15, or 20 years
    Depends on policy
    Get affordable term life insurance with accelerated underwriting or no-exam coverage up to $1,000,000. Available in all states except CA, NY and MT.
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    Compare up to 4 providers

    Is permanent life insurance a good investment for a child?

    If you have multiple savings accounts and investments for your child, a whole or universal life insurance policy that accumulates cash value can be a great way to supplement their investment portfolio. But it’s usually not the best idea for the first or main way to invest money for their future.

    Life insurance tends to have higher administrative costs than other investment avenues, which eats into your returns. You also don’t control how your money is invested, so you don’t have the power to change investment strategies as the market changes.

    What are alternatives to life insurance for my child?

    Life insurance isn’t the only way to help your child financially or build a contingency fund. You can start investing for your child’s future with a:

    • 529 savings plan. A 529 plan is an account that allows you to save for your child’s education costs. The account is tax-advantaged and has an age limit, but funds can be used for qualifying education expenditures. Tuition, dorm costs and supplies are just a few costs that you may be able to use the funds for.
    • Private tuition plan. Similar to a 529, certain private institutions offer savings plans for education costs.
    • High-interest savings account. When you’re looking to save for more than just the cost of your child’s schooling, it may suit you to look into a high-interest savings account.
    • Certificate of deposit (CD). A CD is a low-risk investment that can offer higher returns than a traditional savings account, particularly if you can commit to not touching it for several years or more.

    Bottom line

    Buying life insurance for your child is a huge decision, and you likely won’t have an answer right off the bat. As with the rest of life insurance, there are many moving parts to consider before you make a decision. Take your time and compare life insurers to figure out what fits your family’s needs best.

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