Life Insurance for Children: How It Benefits Their Lives

When discussing life insurance policies, your children’s life insurance might not automatically come to mind. However, we encourage you to consider life insurance for children.

What Is Child Life Insurance?

Child life insurance is a life insurance policy purchased usually by a parent or grandparent to cover the life of a minor. In general, child life insurance is a permanent policy that covers the child’s entire life, even into adulthood. Coverage amounts are usually low, but the premiums are also locked in and won’t go up as the child grows up. Depending on the policy, the child will take ownership of the policy at age 18 or 21, and then they can decide to continue the policy or to cancel it. 

Many people believe that child life insurance is most valuable for the parent or whoever the beneficiary is, instead of the child. While there is a death benefit (the money typically meant to cover funeral costs and other expenses that are given to the beneficiary) included in these policies, there are many other advantages that benefit the child and their future. Child life insurance policies are useful for children during their life, and here are four reasons why.

Benefits of Life Insurance for Children

  1. Protect your child’s insurability:
    Thousands of children every year are diagnosed with conditions that will prevent them from being able to obtain the life insurance policies they will need as adults. By insuring your child as early as 15 days into their life, you can lock in their ability to be insured regardless of what may happen to their health in the future.
  2. Guarantee low costs:
    Premium costs for young children are significantly lower than adult rates so getting a policy started for your child while they are young is a small expense for you now that will equate to huge savings for your child later. 
  3. Ensure they can purchase additional coverage later in life:
    By insuring your child at a young age, you can take advantage of many policies’ guaranteed insurability rider. This rider addition means your child will be able to increase their life insurance coverage at designated times in the future, no questions asked.
  4. Provide cash value and savings along the way:
    Permanent whole life insurance for kids also has the added bonus of cash value which some people like to think of as a savings component. Cash value is the equity they’ll have in their child life insurance policy. Equity grows over time and the best part is that it is accessible to you and/or your children during their lives. Cash value is one of the best “living benefits” of whole life insurance.

While some advisors and financial planners tell parents it’s not necessary to insure their children because of the added cost and low short-term return, it actually can save you and your child money in the future and provide many benefits to them later on in life. Here are a few common arguments against buying life insurance for children and why we generally disagree with them.

Common Arguments Against Buying Life Insurance for Children

  1. There are so many fees that the savings vehicle isn’t worth it:
    This argument against buying life insurance is valid about universal life insurance or IUL (indexed universal life) but not true for whole life insurance. We recommend whole life insurance for children because it has better benefits. There is a fixed policy fee with whole life insurance but it is low because it is not based on a percentage of the policy premium.
  2. Investments and other similar options can accrue more money faster than cash value in life insurance policies:
    Could you save more by investing or doing something else with your money? Possibly. The stock market is an ever-changing game though nobody knows what it will do next. If a parent is inclined to invest money for their children that’s fine, but we also encourage them to provide certainty by getting life insurance too.
  3. The odds of your child passing away and you needing the death benefit is slim:
    This is a true statement, and parents hope they never have to use the death benefit of a child life insurance policy, but aside from the living benefits that a child’s life insurance policy provides, we believe that no parent should ever have to face financial stress on top of the loss of a child.

If you’re still on the fence about child life insurance, here are some other frequently asked questions that will help you in your decision-making process.

What Type of Life Insurance Should You Use to Insure Children?

While there are different types of life insurance policies, the best child life insurance policies are permanent participating whole life insurance. Term life insurance is another option for adult life insurance but is unavailable to purchase as a standalone life insurance policy for your children. Most insurance companies don’t offer term life insurance to those under the age of 18. You can also add a small amount of coverage for your children to your own existing term life insurance policy if you choose. But whole life insurance is the preferable choice anyway because whole life insurance offers the ability to build cash value

Example of a Policy’s Payments and Coverage

In many cases, the price to insure a young child under the age of one is not even a dollar a day to provide $50,000 in face-value coverage. Life Benefits can provide a free life insurance quote if you’d like a better idea of the cost associated with insuring your children.

Who Is the Policyholder?

With life insurance for adults, the policyholder is usually the person who is being insured and covered by the policy. With life insurance for kids, a parent, grandparent, or legal guardian would be the policyholder, even though it is the child who is being insured.

Get Child Life Insurance With Life Benefits

If you have other questions about buying life insurance for children or want to know how to set up the best life insurance policy to get the most cash value for your children to use throughout their lives, we are here to help. Schedule a free appointment, and we’ll help you make the right decisions for your kids’ life insurance.

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