Life insurance for children

You can insure your kids as they grow up — 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.

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What is life insurance for children?

A life insurance policy for children works just like it does for adults. If they die during the time they’re insured, their beneficiary receives a payout from the insurance company.

Most policies that are marketed to 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 for purchasing life insurance for children

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.
  • Secures premiums for the future. Taking out a permanent life insurance policy can ensure that your child doesn’t have to worry about being denied due to health problems when they’re older. But for most healthy children, this isn’t necessary – and it can be an expensive guarantee.
  • 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 a child dies, and the parents need to take time away from work during the grieving process.

Protecting your child’s insurability

This is industry speak for ensuring 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

    How do I buy life insurance for my child?

    There are two ways to go about this. You can either:

    • Purchase a standalone policy. Most major insurers sell whole life insurance policies 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 on 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.

    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 will likely not be subject to any sort of medical exam.
    • Conversion to a permanent plan. Child mortality rates are low in the US — a young child’s odds of passing away within the next 20 years is less than 1% — so it’s incredibly likely your child will outlive a rider you purchase. Some providers account for this and allow for the coverage to convert to a permanent plan once your term 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.

    Cons

    • Cost. Rider costs may be steeper than you’re able to afford upfront. Be sure to investigate the full cost of your policy and the rider, or the permanent policy for your child.
    • Value. Often times the college-savings component doesn’t include any sort of interest. As such, it may not be the most effective savings tool.
    • 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 is another factor that depends on the insurer.
    • Age restrictions. You may be faced with an age restriction for either yourself or your child. Check with any providers you’re comparing to confirm if the minimum age is being met and the maximum is not being exceeded.
    • Eligibility. Though there are often no medical exams, your child may still not qualify for coverage. 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 Ages Minimum Coverage Maximum Coverage Medical Exam Required State Availability
    LadderLife™ Life Insurance
    20 - 60 years old
    $100,000
    $8,000,000
    No
    Not available in New York
    Term life insurance with no policy fees and the freedom to cancel anytime. Simple application process that can get you approved for coverage instantly.
    Fabric
    25 - 60 years old
    $100,000
    $5,000,000
    No
    Available in all states except for Montana
    Offers term life insurance with accelerated underwriting. No-exam coverage up to $1,000,000 for those who qualify.
    Sproutt
    18 - 100 years old
    $50,000
    $3,000,000
    No
    Nationwide
    This life insurance broker combines technology and the human touch to match you with a policy tailored to your needs.
    AIG
    AIG
    20 - 85 years old
    $100,000
    $2,000,000
    Depends on policy.
    Products and product features may not be available in all states.
    This well-established life insurance provider could offer you $250,000 worth of coverage for as low as $14 per month.
    Bestow
    21 - 54 years old
    $50,000
    $1,000,000
    No
    Not available in New York
    Affordable 2-, 10- and 20-year term life insurance policies. Instant quotes and no medical exams.

    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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