Buying Life Insurance for Children

Should you buy life insurance for your child? Probably not, but it depends. Compare child life insurance quotes—and more importantly—parent life insurance quotes online today.

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Tim is a licensed life insurance agent with 23 years of experience helping people protect their families and businesses with term life insurance. He writes and creates stuff for QuickQuote and other insurance and financial websites...

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UPDATED: Jun 24, 2020

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Should we buy life insurance policies for our young children? We get this question often from customers and others visiting our website. If you posed this question to a group of insurance or financial advisors, you would surely get a heated debate along with a mixed bag of responses. I wish there were a simple answer to it but, like most things in life, your unique circumstances and perspective will dictate what’s best for you and your family.

That may sound like a cop-out, and maybe it is. But let’s reserve judgment on that until we take a closer look at the reasons why/why not you should/should not buy life insurance for your children. You may agree it’s not as black-and-white as it would appear.

Types of Life Insurance for Children

There are three types of life insurance available for children:  term life insurance, a term life rider, and whole life insurance.

Term Life – Term life is inexpensive and provides coverage for a particular period or term. You can purchase a 20-yr policy for $50,000 coverage on a 10-yr old child at an annual rate of $85.00 from Genworth Life Insurance Company. At age 30, your child would have the option of extending the coverage on the policy, replacing the policy with a new one or converting the policy to a permanent policy such as Universal Life. Keep in mind all of these options would be at a much higher cost at that time.

Term Life Rider – A rider is an additional benefit added to an insurance policy. In this case, a children’s term life rider would be added to a parent’s policy. These riders max out between $10,000 and $20,000 worth of coverage and will cover your dependent children to a specific age, usually 23-25. You can purchase a children’s term life rider for $20,000 coverage at an annual rate of $120.00 from Protective Life Insurance Company. It’s important to note that one rider covers all of your eligible children. You don’t need a separate one for each!

Whole Life – Whole life insurance provides coverage for, well – your entire life. Unlike term life, coverage continues as long as the premiums are paid. You can purchase a whole life policy for $50,000 coverage on a 10-yr old child at an annual rate of $495.00 from Gerber Life Insurance Company. The rate on their Grow-Up Plan will vary depending on your state and your child’s gender. Some nice features of the plan are coverage doubles at age 18; the premiums never increase, and the policy builds cash value!

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Reasons To Buy Life Insurance for Children

Provide a Savings Plan

A whole life insurance policy builds cash value that the policy owner can borrow from or cash out if the policy is turned in. With the Grow-Up Plan from Gerber Life, the policy’s cash value is guaranteed to be equal to or greater than all the premiums paid after 25 years.

Lock-In Insurability

Purchasing a policy for your child now could lock in their insurability for the future. Remember, a person has to show reasonably good health to qualify for life insurance. If your child develops medical conditions later in life, she may have difficulty obtaining life insurance. And while the likelihood of your child becoming uninsurable is very small, securing a policy now does provide protection against it.

Protect Student Loans

Your children may end up taking out student loans to help pay for college. And you may end up co-signing for those loans. If this is the case, a life insurance policy can provide protection for repayment of those loans should something happen before they can be paid back.

Provide Financial Support for a Grieving Family

Losing a child is a parent’s worst nightmare. I know I can’t imagine how I would ever be able to return to work if it were my child. A life insurance policy can help provide financial support until you and your family get back on your feet. At the very least, it can help defray funeral and burial costs.

Reasons Not to Buy Life Insurance for Children

Children Have No Income to Protect

The primary reason to purchase life insurance is to replace lost income. At least for adults. Of course, children don’t have an income to replace so many believe life insurance for children is a waste. If you have no other reasons to purchase, you’re much better off putting those insurance dollars toward a policy for you and one for your spouse. Your family will benefit considerably more by having coverage in place for Mom and Dad.

There are Better Savings Vehicles Available

Using a whole life policy as a savings vehicle alone is probably not a wise choice. There are plenty of better options available such as low-cost mutual funds, Education IRA’s and 529 plans. These tools have the potential for greater returns than a whole life policy, but there is no guarantee. Their returns will be dictated by the markets, whereas returns on a whole life policy are more predictable.

As you can see, you have a lot to think about when considering life insurance for your children. As I mentioned at the start, your decision will depend on your circumstances. But you don’t have to make it alone. Consult with a qualified life insurance broker and together find the best course of action for your family!

Should I buy life insurance for my child?

In a CNNMoney Ask the Expert column, Sarah Max asked the question, “Should I buy life insurance for my child?” Sarah included expert opinions on the value of insuring a child against premature death versus utilizing those premium dollars to build a college fund instead. The consensus was to invest the money and forego the life insurance. But the primary discussion was about whole life insurance, which is where the story falls short.

As Sarah and the experts point out, whole life insurance builds cash value and can be used to guaranty a person’s insurability should she become seriously injured or develops an illness later in life. But those features come at a steep cost in the form of fees and other charges, which can slow the cash value growth and delay the return on your investment for decades.

Thankfully, there’s a better way — which we’ll get to shortly. But first, here’s why you should buy life insurance for your children to begin with.

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Final Expenses

The National Funeral Directors Association estimates the cost of an average funeral in 2013 was approximately $7,400. And that’s for ‘basic’ services and materials such as a metal casket.

Finding that much money for an unexpected funeral is difficult for many people. It would create a sizable dent even for those with a sufficient emergency fund. A life insurance policy can help if you could not afford to provide a proper burial for your child.

Time to Grieve

This is the primary reason I believe in life insurance for children. I can not imagine the grief I would experience if one of my children were to die. And returning to work would be the furthest thing from my mind. How long would it take before you could effectively return to work? A week? A month? Longer?

Would your employer, customers or clients give you the time you need to grieve? If so, at what cost? A life insurance policy on your children can offset the loss of income you would experience from an extended time away.

Family Help & Counseling

Even after the initial grief wanes, you and your family will likely want to seek counseling to help get through this difficult time. Sadly, not all health insurance policies provide adequate mental health benefits. It’s possible you will need to pay out-of-pocket for any ongoing counseling or therapy you or your loved one require. Life insurance policy proceeds can help cover the cost of such services.

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A Children’s Term Life Insurance Rider May be the Answer

Genworth Life Insurance Company is one of the very few life insurance companies that offers term life insurance policies for children. Most companies offer policies beginning at age 18. But you can purchase term life insurance for your children in the form of a rider on your policy from almost any company. A rider is simply additional coverage added to a policy to insure something other than the primary insured’s life. As an example, imagine adding a jewelry rider to a homeowner’s policy to insure expensive items beyond what the base policy provides. It’s the same concept with a children’s term rider.

These riders vary slightly by the company, but they provide similar coverage at comparable costs. Here’s how ING ReliaStar Life’s child term rider works.

  • Coverage Amount – $2,000 to $10,000
  • Cost – $12.00 to $60.00 annually
  • Cost covers all children regardless of the number
  • Age Coverage Begins – 15 days
  • Age Coverage Ends – 25 years
  • Conversion to an individual permanent policy is available

The primary differences you’ll find are in cost and coverage amount. For example, some companies offer child term riders up to $25,000. Another key point to note is that one rider will cover all children in the family. So a $60.00 child term rider would provide $10,000 coverage for each child, whether you have one or ten. Many riders will extend coverage to stepchildren and adopted children of the insured as well.

Term life insurance provides the best value in life insurance protection. Adding a children’s term life rider can add more even value and help you achieve a more well-rounded approach to protecting your loved ones.

Why Buying Term Life Insurance for Your Children Isn’t as Creepy as You Think

Several years ago, one of my husband’s friends from high school and his wife lost their teenage son in a vehicle accident. Their son and three of his high school friends (all much-loved football players with bright futures ahead of them) perished after their car hit a bump on a back road and the boy who was driving lost control.

Although I saw first-hand the debilitating grief of my husband’s friend’s family, I can’t pretend to know how difficult it would be to be in a similar situation. It’s unfathomable to me. The mere thought of losing a child to illness, accident, or any other tragedy reduces me to tears. How parents who have experienced that loss find the strength to overcome the devastation is beyond my comprehension. I imagine the emotional impact, regardless of how much love and support you receive, would be overwhelming.

While none of us as parents want ever to think about losing our children, the reality is we can never know what hand life will deal us. So much is out of our control—including how we might react and recover.

I used to think it was sort of creepy to consider life insurance for children, but with the severe emotional anguish that would accompany the death of a child, it’s understandable that financial hardship might follow, as well. Life insurance for children won’t help parents mend their broken hearts, but it might help ease some of the financial challenges they face.

Cost of Final Expenses

According to the National Funeral Directors Association, the cost of an average funeral in 2012 was approximately $8,343. That’s a significant expense, even for people who have a decent emergency fund. With a life insurance policy, families can more easily afford to cover final expenses.

Loss of Income During an Indefinite Grieving Period

According to QuickQuote’s founder, Tim Bain, this is the primary reason parents might consider life insurance for their children.

“I cannot imagine the grief I would experience if one of my children were to die. And returning to work would be the furthest thing from my mind. How long would it take before you could effectively return to work? A week? A month? Longer?”

Bain also asks, “Would your employer, customers, or clients give you the time you need to grieve? If so, at what cost?”

A life insurance policy on your children can offset the loss of income you might experience by taking an extended absence from work.

Support and Counseling Costs

After a tragedy of such magnitude, families often need counseling to help them deal with the loss. Unfortunately, not all health insurance policies provide sufficient mental health benefits to cover related costs. Life insurance policy proceeds can help cover the cost of such services, so your out-of-pocket expenses are more manageable. 

About Term Life Insurance to Cover Your Children

As you consider investing in life insurance to cover your children, you’re likely sensitive to the potential premium costs. After all, raising a family isn’t inexpensive, and a high life insurance premium may not work well with your budget. Fortunately, most insurance companies that handle term life policies provide you with the option to purchase term life on your children in the form of a rider on your policy.

According to Bain, “A rider is simply additional coverage added to a policy to insure something other than the primary insured’s life. As an example, imagine adding a jewelry rider to a homeowner’s policy to insure expensive items beyond what the base policy provides. It’s the same concept with a children’s term rider.

These riders vary slightly by the company, but they provide similar coverage at comparable costs.”

Important to note is that one rider will cover all children in your family. So if you’re paying $60.00 for a $10,000 child term rider, the death benefit is $10,000 for each child, regardless of whether you have one, two, five, or even more children. Some riders extend coverage to adopted and stepchildren as well.

Preparation, not Premonition

Considering life insurance for your children doesn’t mean you’re expecting or willing the worst to happen to your loved ones; it simply means you care enough about your family to ensure you’re prepared for anything.

If you’d like to learn more about term life policies and child term riders for you and your loved ones, talk with a trusted professional who can answer all of your questions.

Buying Term Life Insurance for Your Children

It may seem strange to think about buying term life insurance for a child. After all, beyond the emotional loss, your family likely wouldn’t suffer from the loss of income, which is typically the reason people buy life insurance in the first place. Life insurance is designed to care for loved ones that depend on you once you are gone, it does not make sense to purchase a life insurance policy for a child. You don’t need life insurance for your children as they do not have dependents that need financial care once they are gone.

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Death Expenses

Of course, there are some reasons to get your child life insurance. When considering purchasing such insurance for your children, think carefully about how their death could affect you financially. Consider expenses such as funeral costs and, depending on the age of the child, the possibility of having to take care of any unsettled debts. In this case, term life insurance for a child does make sense. Burying a child is unimaginable, but struggling to pay for the funeral would make it even more challenging.

Child Riders

Unfortunately, very few insurance companies offer separate policies for children. There are child riders, however, which many companies offer as an add-on to a parent’s insurance coverage. Typically parents can pay an additional flat fee and in the unfortunate event that their child died they could receive some coverage for these costs.

Reasons to Buy It

Some say that the only reason for buying life insurance for children is if there is a family history of health problems, such as diabetes or heart disease, which might make it tough for them to get insurance when they’re in their prime years. It is impossible to determine how much a child will earn in the future. The best life insurance policy for children is on a 20-year policy. When the life insurance policy expires, you can find one that is renewable with the option of converting to more permanent insurance. A great benefit of this is that most carriers will not ask for any medical exams since the insured has already built a history with them.

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Is it a Good Investment?

Life insurance policies for children are also available as an investment to save for the future. Term life provides coverage for a predetermined term. You can find some policies which can be converted to more permanent life insurance which typically provides coverage for the entire life of the policyholder while also building cash value for them that they can cash in when they get older.

Insuring a child is not necessarily the best idea for everyone but a trusted agent can guide you through the advantages and disadvantages of insuring your child. Compare quotes online today to learn about all the variable products of life insurance for children to find the option for you and your family.

 

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