Life Insurance For Children

People frequently focus on establishing life insurance policies for themselves in order to provide financial coverage to loved ones in the event of their death, but it may be financially advantageous to establish policies for children as well. Child life insurance policies can be used to provide coverage for life-threatening illnesses, lock in a child's insurability, or even as an investment vehicle. There are benefits and drawbacks to this approach, which has many parents and guardians wondering if they should buy a life insurance policy for their child. The StrongInsurance editorial team goes into greater detail about this so you can decide if it is the best option for your family.

Should you buy life insurance for children?

Unsure whether you should buy life insurance for your child? Here are four of the most common reasons why families buy life insurance for their children.

Guaranteeing your child’s future insurability

Purchasing life insurance for your child can help ensure their insurability in the future. Typically, your child's health rating will be set in stone for the foreseeable future. That means that even if your child is in poor health or develops a condition like diabetes as an adult, they will most likely be able to obtain coverage at a lower cost than if they waited until later in life.

Providing an investment vehicle for your child

Whole life insurance policies include a cash value account. If you buy a whole life insurance policy for your child, they may choose to surrender it and collect the proceeds, or they may borrow against it when they reach adulthood. Keep in mind, however, that whole life cash value accounts accumulate cash value slowly over time, so this may not be the best investment vehicle if a cash account is the primary reason for you purchasing coverage.

Covering costs if something happens to your child

One of the most traumatic experiences is the loss of a child. If the worst happens, having child life insurance can help you focus on grieving and healing rather than worrying about the costs of a funeral. Although death is a difficult subject to consider, the average funeral cost in the United States is $7,640.

Your child’s health

While child mortality rates in the United States are low, some children have health problems or come from a family with a history of medical or genetic problems. According to the CDC, there are 22.7 deaths per 100,000 children aged one to four years old in the United States. If your child fits this description, life insurance may be even more beneficial.

Why you should consider buying life insurance for children

You have a very slim chance of outliving your child or grandchild. Nonetheless, there are some reasons why you might want to purchase a children's life insurance policy. "The purpose of having different types of insurance is to reduce financial risk and give you peace of mind," says insurance expert Laura Adams. When it comes to life insurance for children, there are advantages and disadvantages that parents should consider." Examine when life insurance for children is most appropriate.

If your child suffers from a life-threatening illness

If your child has a debilitating or chronic illness, life insurance for children may be a good idea. Larger amounts of life insurance would necessitate a medical exam, but you could purchase insurance for smaller amounts to cover burial costs, such as final expense insurance, without subjecting the child to a medical examination.

If your family is genetically predisposed to certain conditions

If you are concerned that your child will inherit a genetic or medical condition, purchasing life insurance for your child before the condition becomes chronic or life-threatening could lock in future life insurance when the child reaches the age of 18. Here are some examples:

• Chromosomal disorders
• Monogenic disorders, like Cystic Fibrosis
• Genetic disorders

Consider the possibility of a child developing a medical condition that is not insurable. "Purchasing a permanent life policy early in the child's life ensures they have at least that much coverage as an adult," Adams says. In addition, if your child dies, the policy will assist you in covering funeral expenses and other costs."

You have the option of purchasing either term or whole life insurance.

You could select a term life insurance policy with guaranteed renewal or one that can be converted to a permanent life policy before it expires. Term life insurance policies are typically less expensive due to the lower likelihood of a policyholder dying during the term length, and they do not require a medical exam at renewal or conversion.

Alternatively, you could buy a permanent or whole life insurance policy early on. Are you wondering if whole life insurance is worthwhile? Whole life insurance policies are typically more expensive, but the rate is guaranteed for life. The rates and coverage will not change as long as your child continues to pay for the policy into adulthood.

Why you should not buy life insurance for children

Some life insurance companies may advise you to purchase a whole life policy to provide financial protection for your child's life as well as college savings. A whole life insurance policy is permanent, with no expiration date and a cash value component. The premium you pay is applied to the death benefit, with a portion going into a cash value account. If saving is your primary goal, other investments may be more effective than the premiums you'd pay into a policy.

"While a permanent life policy accumulates cash value over time that you can use for any purpose," Adams writes, "the main disadvantage is that it may have relatively high fees and may not be the best investment vehicle." You may benefit more from a 529 college savings plan or a regular investment account."

Pros and cons of buying life insurance for your child

Before making your decision, consider the benefits and drawbacks of purchasing life insurance for your child.

Buying life insurance for your child can make them more insurable in the future by securing a health rating that they can use for the rest of their lives. Even if they develop diabetes, they will usually be able to obtain competitive health insurance at a lower cost than if they were not insured at a young age.

Your child may choose to use the cash value portion of their policy in the future by borrowing against it, withdrawing the funds, or even surrendering the policy. If the worst were to happen and your child died, having a policy in place could give you more time to focus on grieving rather than worrying about the costs of an expensive funeral.

Child life insurance, on the other hand, is not for everyone. Cash value accounts typically offer a low rate of return, and these policies have a low coverage limit.

Where to purchase life insurance for kids

You have several competitive life insurance companies to choose from if you want to buy the best life insurance for kids. After reviewing their policy offerings, you may want to speak with a licensed insurance agent and obtain a few quotes to see where you can save the most money. Among the leading insurers are:

• Gerber Life: While Gerber is best known for selling baby food and products, the company also has a life insurance division called Gerber Life. Permanent life insurance policies can be purchased for children aged birth to 14 for amounts ranging from $10,000 to $50,000.
• Mutual of Omaha: Mutual of Omaha sells children's whole life insurance. You can buy a policy for a child as young as 14 days old and up to the age of 17. Benefits range from $5,000 to $50,000 and can be obtained online or through an insurance broker.
• Transamerica: Transamerica reduces the minimum amount of life insurance required for children. For an infant or child up to the age of 17, you can purchase a policy worth $1,000 to $50,000. To learn more about Transamerica's child life insurance, contact an agent or visit a participating broker in your area.
• Foresters Financial: Foresters Financial offers the best value in children's life insurance. It was recently introduced and provides coverage ranging from $5,000 to $75,000 for children up to the age of 17. To obtain a quote or purchase life insurance, you must speak with an agent.