Your Guide to Life Insurance for a Child

Getting life insurance for your child or grandchild can offer several benefits. Covering them with a policy now can give them benefits as an adult, such as guaranteed insurability or lower rates. It can also protect you from potential financial strain if your child were to pass away.

Here’s why you might want to consider life insurance for your child and how to secure coverage.

Why You May Want Life Insurance for a Child

Ease Financial Strain If Your Child Were to Pass

While no parent wants to imagine the unthinkable, securing life insurance for a child can be a cost-effective way to plan for their final expenses, as the premiums on these policies are often low.

Losing a child is traumatic, and you shouldn’t have to worry about finances on top of that. The life insurance payout can help you cover your child’s burial and funeral expenses. It can also help you cover everyday expenses while you take time off work to grieve.

Give Your Child Insurance Benefits as an Adult

Your child can also benefit from their coverage as an adult. By insuring them now, your child may be able to keep the policy or convert it later on. If they develop a condition that prevents them from obtaining affordable coverage (or coverage at all), they can renew the policy you took out without needing to prove insurability.

How to Purchase Life Insurance for a Child

You can purchase a policy for a minor child in a few ways. Each option has benefits and drawbacks, and not all options may be available to you.

Get Your Child Their Own Policy

You can get a term or whole life policy for your child in the same way you can get a policy for yourself. However, when covering a child, you’re technically both the policy owner and beneficiary. So, your child likely won’t have to undergo a medical exam to prove they’re qualified.

You have the same basic considerations when deciding which policy to get for your child as you do for yourself. For instance, term policies may have lower premiums, but coverage only lasts for the specific term (although it may be renewable) and doesn’t build cash value. Meanwhile, whole life policies can be more expensive but accumulate a cash balance and remain in force as long as the premiums are paid.

Pros

• Whole life policy premiums are generally fixed at the time the policy begins. By insuring your child now, you can lock in a lower premium rate that can benefit them if they choose to maintain the coverage as an adult. You may even be able to pay for the policy entirely over a fixed number of years rather than their whole life.
• If your child continues coverage as an adult, they typically won’t have to prove insurability.
• If you purchase a whole life policy that your child continues, the cash value can grow for a longer time. They can use the cash their policy accumulates to cover any expense they choose.

Cons

• You may have better options to grow your child’s long-term savings than a whole life policy. This is because life insurance cash values tend to grow more slowly than other investment options.
• If your child continues coverage as an adult, they become responsible for the premium payments. This could strain their budget if they can’t take on this expense.

Cover Your Child with a Rider on Your Policy

If you have your own life insurance policy, you could add a rider to your policy that gives your child coverage—if your insurer offers it. Some insurers require that you include this rider when you initially purchase the policy, but some may allow you to add it later.

Pros

• A child term rider is likely the least expensive option. The rider covers all of your children, often giving you the same premium regardless of how many children you have.
• Your child likely won’t need to undergo a medical exam to qualify. If the insurer allows your child to convert to their own policy later, this could be a benefit—especially if they develop a condition that might hurt their approval odds.

Cons

• The rider may terminate once your child reaches a certain age—typically 25, though policies can vary—or gets married. Some contracts allow the child to continue coverage by converting to a standalone policy at that time, but the amount is often limited to just a few times what the rider provides.
• Coverage is typically limited to $25,000 or less. However, this may be all you need to cover burial and funeral arrangements.

Add Your Child to Your Workplace Life Insurance

If the option is available, you may be able to add your child through your employer group life insurance, known as dependent life insurance. It’s similar to getting a child term rider on your own policy but with two main differences:

• Your child generally won’t have the option to continue the coverage by converting to their own policy when they no longer qualify. If they pass the age limit or you leave your employer, they’ll typically lose coverage.
• Life insurance proceeds generally aren’t taxed. However, if your employer pays for more than $2,000 of dependent coverage, the benefits are taxable.

Protecting What’s Most Valuable

Life insurance for children can help cover funeral expenses and provide other potential benefits for them into adulthood. That said, not every situation may call for such coverage. If you need help understanding whether this coverage is right for you and how to obtain it, reach out to a financial professional for assistance.

Insurers and their representatives are not permitted by law to offer tax or legal advice. The general and educational information here supports the sales, marketing or service of insurance policies. Based upon individuals’ particular circumstances and objectives, they should seek specific advice from their own qualified and duly-licensed independent tax or legal advisors.

Colonial Penn is here for you!

Colonial Penn has specialized in making life insurance simple and accessible by offering it directly to consumers since 1957. Click here to learn more.