Life Insurance for Children: Should You Buy It?
It’s important to weigh the costs and benefits to determine if this coverage is right for your family.
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Written byBen Luthi
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Ben Luthi
Ben Luthi has been writing about personal finance for over a decade with the intent to help people improve their finances and lifestyle. He’s covered just about every personal finance topic under the sun for a variety of publications, including the Wall Street Journal, Fortune Recommends, Yahoo Finance, Experian, Credit Karma, NerdWallet, and many more. Ben lives near Salt Lake City with his two kids and two cats.
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Edited byAshley Cox
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7+ years in content creation and management
5+ years in insurance and personal finance content
Ashley is a seasoned personal finance editor who’s produced a variety of digital content, including insurance, credit cards, mortgages, and consumer lending products.
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Table of contents
A child life insurance policy can provide a handful of benefits, including a death benefit, a guarantee of future insurability, and even some long-term savings.
At the same time, some of the benefits of life insurance for children can take several years — even decades — to be worth your while. Understanding how this coverage works and the potential advantages and disadvantages can help you determine whether it’s right for you.
Quick Facts
Life insurance for children typically comes in the form of a whole life policy.
Coverage levels and monthly premiums tend to be low.
If child life insurance is right for you, get quotes from multiple insurance companies to ensure you get the best rate.
What is life insurance for children?
Child life insurance typically comes in the form of whole life insurance, also called permanent life insurance.
Whole life policies typically offer lifetime coverage as long as you pay premiums. In addition to a death benefit, a whole life policy also includes a cash value component, where a portion of your premiums grows at a low rate of return.[1]
In contrast, a term life policy provides a death benefit for a specific period of time — usually 10 to 30 years — and doesn’t provide cash value.[2]
Some of the reasons parents may buy life insurance for their children include:
It can provide financial support during a time of grief.
The child may utilize the cash value to help pay for college or cover other expenses.
It can guarantee future insurability if the child develops health issues.
Premiums tend to be relatively low.
It often doesn’t require a medical exam.
How life insurance for children works
For the most part, whole life insurance works the same for children as it does for adults. In exchange for a premium payment, the insurance company provides a death benefit.
If the child passes away, the policy’s beneficiaries — typically the parents — will receive the death benefit, which they can use to cover funeral expenses, medical bills, and even some lost income while they grieve.
Over time, the cash value account balance will grow and may be accessible through a policy loan. If you or your child decides to cancel the policy, they may also receive the funds that way.
One major difference between a child policy and an adult policy is the coverage amount. In many cases, coverage levels max out at $50,000, though some may go as high as $75,000. But monthly premiums are much lower than if your child were to purchase a similar policy once they become an adult.[3]
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Pros and cons of life insurance for children
Buying life insurance for a child is a personal finance decision, and like any other financial decision, it has both benefits and drawbacks to consider. Here’s what to keep in mind.
Pros
Financial protection: Losing a child may not be as financially impactful as losing a breadwinner, but having a child life insurance policy can give parents some time to grieve a devastating loss without worrying about money.
Includes savings: As you pay premiums, a portion of that money will go into a cash value account, which grows over time. As the policy owner, you may be able to borrow against the cash value to help your child pay for college, wedding expenses, or other costs.
Guarantees future insurability: Getting your child a whole life insurance policy while they’re young and healthy will secure that coverage even if they develop health issues as they get older. Some policies may even allow your child to increase coverage without a medical exam.
Cons
Cash value grows slowly: The cash value attached to the policy grows at a low rate, so it can take several years to amass a meaningful amount of funds.
Long-term costs: While premiums tend to be low, you may still have to pay them for up to a couple of decades before your child can take over the policy. If you’re on a tight budget, you may prefer to spend that money on other family needs.
The risk is relatively low: Young children pass away at a much lower rate than older generations, according to data from the Centers for Disease Control and Prevention.[4] In other words, the risk of not having coverage may not be great enough for some people to pay for a policy.
Should you buy life insurance for a child?
While life insurance for children may be worth considering for some families, it’s not a necessity for all. It’s crucial for you to consider your family’s financial situation, needs, and objectives to determine whether it’s the right choice for you.
Here are some situations where it could make sense to buy child life insurance:
Your family has a history of medical conditions that could preclude life insurance coverage for your child in the future.
You want to supplement an existing investment strategy for your child’s college education.
You can afford monthly premium payments without jeopardizing other financial goals and obligations.
Your child is an adolescent whose part-time income contributes to the family’s needs.
You have an older child who provides caregiving to younger siblings that would otherwise need to be outsourced.
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When does life insurance for children not make sense?
While a child life insurance policy can make sense in some cases, there are others where it won’t. Here are some situations where it may be better to pass:
You and your partner don’t have sufficient coverage for yourselves.
You’re on a tight budget and can’t afford the premiums.
You have sufficient emergency savings to cover the potential cost of a funeral and other financial needs in the event of your child’s death.
Your family doesn’t have a history of severe medical conditions.
If you want coverage but aren’t sure about the cost, consider speaking with an agent at your insurance company to see if you can add a child rider to your existing life insurance policy.
Good to Know
A child rider is an add-on that provides coverage for one or more children at a lower cost compared to a stand-alone whole life policy. Keep in mind, though, that your child won’t get lifetime coverage or a cash value component.
Companies that sell life insurance for children
Many companies that sell life insurance offer whole life policies for children. But it’s important to consult an insurance professional from a trusted source. Here are a handful of insurers with strong financial ratings:
New York Life offers coverage nationwide and includes a rider that allows your child to purchase additional coverage at designated times regardless of insurability.
Northwestern Mutual offers coverage nationwide, includes an additional purchase benefit, and doesn’t require a Social Security number to buy a policy.
Aflac offers coverage nationwide and starts out as a term policy with the option to convert to a whole life policy at age 25.
Guardian offers coverage nationwide and provides online quotes.
Mutual of Omaha offers coverage nationwide and provides online quotes.
Life insurance for children FAQs
As you consider your options, here’s some additional information about child life insurance to keep in mind.
What is a child protection rider in a life insurance policy?
Another name for a child rider, this add-on to a parent’s life insurance policy can provide additional coverage for one or more children in the event of their death. It typically only lasts until the child reaches the age of 25.[5]
Which insurance is best for kids?
No life insurance company offers the best coverage for everyone, so it’s important to take your time to shop around and compare coverage options, policy benefits, and premiums to determine the best one for you.
Can you cash out child life insurance?
Yes. If you cancel the policy, you’ll receive the cash value balance minus applicable surrender fees. Keep in mind, though, that these funds are considered taxable income when you receive them. If you want to access the cash value without surrendering the policy, check if the insurer allows policy loans.
Is child life insurance worth it?
Child life insurance may be worth it if you can afford it and have a specific need that such a policy can meet. But it may not be a good idea if you’re on a tight budget or you have other more pressing financial needs or goals.
Sources
- Insurance Information Institute. "What are the different types of permanent life insurance policies?."
- Insurance Information Institute. "What are the principal types of life insurance?."
- Guardian. "Should I buy life insurance for my kids?."
- Centers for Disease Control and Prevention. "Mortality in the United States, 2022."
- U.S. Securities and Exchange Commission. "Children’s Level Term Insurance Rider."
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Ben Luthi
Ben Luthi has been writing about personal finance for over a decade with the intent to help people improve their finances and lifestyle. He’s covered just about every personal finance topic under the sun for a variety of publications, including the Wall Street Journal, Fortune Recommends, Yahoo Finance, Experian, Credit Karma, NerdWallet, and many more. Ben lives near Salt Lake City with his two kids and two cats.
7+ years in content creation and management
5+ years in insurance and personal finance content
Ashley is a seasoned personal finance editor who’s produced a variety of digital content, including insurance, credit cards, mortgages, and consumer lending products.
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