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Life insurance for kids

Jun 27, 2023 5 Minute Read

Every parent expects their children to outlive them, and for many, losing a child is unimaginable. Because it’s uncomfortable to think about, many families never explore child life insurance options or understand the benefits they can provide.

Parents and grandparents may choose to purchase life insurance for kids for different reasons, whether the cost of a funeral would be too much financial burden to bear or, in some rare cases, where the child is contributing to the family’s household income. Regardless of your situation, it’s smart to be informed about life insurance for kids to make the best possible decision for your family.

How does life insurance for kids work?

Children’s life insurance policies are generally term life insurance policies that may later be converted to permanent coverage at a certain age. A kid’s life insurance policy provides a death benefit payment to the beneficiary, often parents or grandparents, if the child passes away while the policy is active.

Some life insurance policies for kids are standalone, while many insurers offer supplemental life insurance or child life insurance riders that can expand the scope of a parent’s existing life insurance policy.

What are the benefits of life insurance for children?

You might consider life insurance for kids for a few main reasons.

  • Cover funeral costs: Much like life insurance for adults, a policy for children can provide peace of mind that you’ll be able to cover funeral and burial expenses if the unthinkable happens. Especially for families on a budget, having to cover the cost of a funeral after losing a child could add unnecessary financial hardship to an already stressful time.
  • Protect future insurability: Another benefit of children’s life insurance is that children can often convert a term policy to permanent coverage at a certain age. That means they could qualify for coverage even if health issues arise, meaning their future insurability can be protected from a young age.
  • Replace income: Another less common situation to take out life insurance on a child is if the child is making money. Young social media influencers can bring in a hefty chunk of income which your family might be dependent upon. Kids that babysit other siblings also provide a financial benefit for your family. If a teenage child regularly watches their siblings, it would cost the family money to replace that job if the teenager were no longer around.

What types of life insurance are there for kids?

There are several types of life insurance for kids, but the process of deciding which one is best can be emotionally draining. That’s where a licensed life insurance agent can help make the best recommendation.

Term life insurance

Most life insurance for kids is term coverage, meaning if a child passes away while the policy is in force, the beneficiary will receive the death benefit. However, because term life insurance doesn’t accrue cash value, there will be no savings component, making term life insurance the most affordable option. Often, term life insurance can be converted to permanent coverage once children reach a certain age and are ready to take over the payments.

Permanent life insurance

Some insurers may offer permanent life insurance for children. Similar to term life, the beneficiary will receive a death benefit if the child passes away while the policy is in force. However, permanent life insurance lasts a lifetime and can also accrue cash value. That means once kids are old enough to convert the policy into their own name, they could have a nest egg for the future.

However, because permanent coverage has two components, the death benefit and cash value, it’s also more expensive and may not be the most cost-effective choice for families on a budget.

Alternatives to child life insurance

There are ways to protect your child aside from getting a standalone children’s life insurance policy, including:

  • Adding a child life insurance rider: A child life insurance rider is an affordable alternative to a standalone policy that acts as an add-on to your existing life insurance coverage. The child rider provides a lump sum death benefit, often from $5,000 to $25,000, if the child were to pass away while covered. Still, it has the added benefit of enabling older children to convert the policy to their own individual policy without going through an approval process.
  • Choosing supplemental life insurance offered through an employer: Some employers offer supplemental child life insurance in addition to company-sponsored group life insurance coverage. That means you may be able to purchase protection for children without them needing to take a medical exam, and the payments will come directly from your payroll, making it less likely to miss a payment.

Should you consider a life insurance policy for children?

Life insurance for children may make sense for some families, but it’s certainly not a need for every family. A licensed insurance agent can help understand your unique needs and situation to find the right policy. Contact eFinancial today or get a quote to get started.

FAQs about children’s life insurance

Do you need a child’s consent to get life insurance on them?

You generally don’t need the consent of a child under 18 years old to get a life insurance policy on them as long as you’re their parent or legal guardian. Some states may require children to sign a life insurance application above a certain age, like 15.

How old must a child be to get life insurance?

You can get life insurance on a child as young as zero to two weeks old. To get a life insurance policy on their own, children must be 18 years old with most insurers.

What is the best amount of life insurance for a kid?

Children’s life insurance policies tend to be small, between $5,000 and $25,000, intending to cover only final expenses if the unthinkable happens. Since children often don’t contribute financially to the household, there’s no need for a significant policy.