Life Insurance for Children: Should You Buy It?

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.

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

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.

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.

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.

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