Children’s life insurance stirs up strong opinions.
Every family’s situation is different, so it’s ultimately a choice only the parents or grandparents can make.
Below, you’ll find a comprehensive guide to both child term riders and standalone policies, plus the pros and cons of each.
We also picked out the best few companies for each type of coverage.
Should You Buy Children’s Life Insurance?
Children’s life insurance makes sense for some families, providing them with security at a considerably low cost.
In other instances, it might not be worth the money, with alternative investments making more sense.
In the best-case scenario, one of these policies could put your child on the path to protection and savings from a young age.
In the worst-case scenario, children’s life insurance could provide you with the resources to cover final expenses if tragedy ever strikes your home.
Regardless of these benefits, whether or not you buy a policy truly depends on your family’s unique circumstances.
Let’s dive into the specific features and advantages of each below.
Types of Children’s Life Insurance
Here’s a more in-depth look at the types of children’s life insurance protection and how they work.
To get a child term rider, one parent must have a life insurance policy.
You can add the term rider to your policy at the time you get life insurance, while some companies may even allow you to add this rider at a later time.
Instead of only covering an individual, this rider covers all of the children of the parent who is insured.
You should talk with your agent if you have a blended family to make sure, but most companies are good about accommodating step-children.
As each child enters adulthood, they’ll have the opportunity to convert their coverage into a whole life policy.
Most companies allow you to convert your children’s policies when they reach age 18, 22, or 25.
You can convert each of your adult children’s coverage while still keeping the rider in place for the younger ones.
Whole Life Insurance
Whole life insurance for children comes in the form of a small policy you can put in place when they’re young to start building cash value which will keep growing throughout their life.
This type of policy is advantageous because it is basically a 20-year head start on permanent life insurance for adults.
Most whole life policies have an option to increase the face amount by up to 5x the original amount in early adulthood.
Since life insurance is most commonly used to replace income, and children don’t tend to work, they don’t need much life insurance until they start their careers.
Child Life Insurance Through Your Employer
Some employers offer benefits packages with coverage for children, attaching them to the life insurance policy you buy through your health plan.
Life insurance through your work can be cheaper since the risk (and premiums) are spread across many people.
The downside is that if you ever leave your job, you lose your insurance. If you choose to continue coverage after leaving your company, you may have to purchase it independently.
This isn’t so bad for children because their coverage will come at a much lower cost than life insurance for an adult.
Yet, if you choose a term plan to cover all of your children, the premiums on your policy will be higher because you’re older, assuming your health is still good enough to qualify for life insurance.
Additionally, if your children have come down with an ailment or have special needs. If this were the case, they may not be able to secure new coverage, even if they already had it previously.
Best Child Term Rider Policies
Children’s coverage through a term rider typically cost less than their whole life counterparts.
Companies often allow you to go back to your life insurance policy after having a child to add this rider.
Other families choose to add it when they take out the policy since having children tends to prompt the “Hey, let’s talk about getting life insurance” conversation.
These are the 3 companies we feel have the strongest child term riders:
- Mutual of Omaha
You’ll notice both Mutual of Omaha and Protective are on the whole life list below, as well, because both companies have developed a focus on creating the best products to cover children.
AIG Child Term Rider
AIG offers coverage on a term rider for a child starting at 15 days old and extends coverage up to their 19th birthday.
They allow multiple children to be covered under a single child rider. You can choose from a face amount between $500 and $25,000.
They also allow conversions of a child term rider into a permanent policy for a child when they reach age 25.
Mutual of Omaha Child Term Rider
Mutual of Omaha allows parents to add a child rider when they first take out the policy. Coverage starts at $1,000 and caps at $10,000.
The downside is that you cannot add the child rider later on.
The child must be between 15 days and 20 years old. Also, all children are covered, even ones you add to the family later on.
When the insured child reaches age 23, they have the option to convert the rider to a permanent policy. There’s no underwriting, and they can increase coverage up to 5x the original rider amount.
There are medical questions regarding your children when you apply for the policy if you choose to add this rider.
Protective Child Term Rider
Protective offers one of the most cost-effective child term riders out of all of the options available. (Note: this does vary by state.)
All children from 15 days to 18 years qualify for coverage amounts between $1,000 and $20,000. There are a few medical questions about the child when you apply for the rider.
The conversion option kicks in at age 25 if your child wants to take over the policy.
Like all of the other top picks for term rider’s, Protective covers all children with one child rider.
Best Children’s Whole Life Plans
There are four companies with whole life policies for children that stand out from the rest of the market.
- Mutual of Omaha
Each of these companies offers whole life plans for children.
As such, they don’t require either parent to keep a policy in force. Parents or grandparents can purchase these plans on behalf of a child.
Unlike the term rider plans, the policy only covers a single child, not all children in the family.
Gerber Grow-Up Plan
You’ll often see the Gerber Grow-Up Plan advertised to grandparents on daytime television.
Subsequently, people often ask us, “is the grow-up plan worth it?”
If a whole life plan for your child makes sense, Gerber is one of the best companies on the market.
Gerber offers the policy to any child from 14 days old to 14 years old, and they provide a young-adult plan for 15 to 17-year-olds.
You can choose a benefit amount between $5,000 and $50,000.
Premiums build a cash value that grows with the policy, and coverage automatically doubles at age 18 for no extra premium, with ownership automatically transferring at age 21.
Your child has the option to purchase more coverage (up to 5x the original amount) at various points in their life, like marriage or the birth of their own child.
While your child is still a minor, you can borrow against the cash value. Once they come of age, they can borrow against it or cash out the policy.
Globe’s policy is the least complicated out of our favorite four companies for whole life.
They offer four policy amounts:
Like all of the other policies featured in this list, there is no waiting period or medical exam.
Children from 14 days to 17 years old qualify for coverage.
Benefits cannot be canceled or reduced as long as you make your payments. Plus, they guarantee that premiums will never increase on the policy.
The policy builds cash value, and once the child reaches adulthood, they keep the policy by taking over premium payments.
Mutual of Omaha
Mutual of Omaha offers a straightforward whole life policy for a child that’ll look familiar to anyone who already has a whole life policy.
They offer a face amount from $5,000 to $50,000 for anyone 14 days old to 17 years old.
There are a few health questions on the application, but no medical exam.
The cash value allows the owner or child to access it at any time.
Once the child takes over the policy between ages 18 and 21, they can cash it in if they decide that life insurance isn’t for them.
Protective Protect My Child
Protective offers two variations on their whole life child policy called level pay and single pay.
Both types are available for children between 14 days and 17 years old. You can choose a coverage amount between $10,000 and $100,000.
Protective doesn’t require a waiting period or medical exam.
The policy will mature when the child reaches age 100, meaning the child will receive the cash value of the policy, and the contract ends.
- Level Pay: This plan offers more customization as your child enters adulthood. The face amount of the policy automatically doubles at age 18. They also have the option of increasing coverage during their life. However, Protective does require a medical exam at age 18 for the child to continue coverage.
- Single Pay: With this option, you only pay one premium, and your child is set for life. While Protective doesn’t require a medical exam at age 18 to continue coverage, your child won’t have the option to increase the face amount during their lifetime. Neither will the face amount double at age 18.
Pros and Cons of Children’s Life Insurance
Whether or not you should purchase children’s life insurance is a personal decision for the parents alone.
Because of the subject matter and implications, everyone has strong opinions about it.
First, consider the following pros of adding coverage for your children or grandchildren.
- Guarantee: The most common reason people tout life insurance for children is the guarantee they will be able to get coverage later on in life. They could have trouble getting insurance later due to health issues, a poor driving record, or a history of drug abuse.
- Growth: Starting to build the cash value of a whole life policy early can give you 18 years of compound interest by the time your child needs to make any major purchases like a home or college tuition.
- Final expenses: The face amount can be a tremendous help in the event of the unspeakable, helping you to cover final expenses, medical bills, and counseling for your grieving family.
While those rewards may sound appealing, you should look at the situation from all sides.
Along with the benefits, consider the potential downsides to purchasing children’s life insurance.
- Ease of getting coverage: Most children grow up perfectly healthy. It’s statistically unlikely they’ll have any medical event that would disqualify them later in life. Even hitting a rough patch in their teenage years with drugs or a poor driving record is unlikely.
- Alternative investments: Other savings and investing vehicles perform better than whole life insurance. Whole life has a slower growth rate than even other types of permanent life insurance.
Should You Use Children’s Life Insurance For A College Fund?
Most advice online will point you away from using life insurance to fund your child’s college education.
There are 529 plans for that.
However, while a 529 plan is usually recommended as your first option, using a life insurance policy can offer often-overlooked benefits.
The big one?
The cash value on whole life insurance doesn’t count against you for financial aid, and qualifying for extra financial aid can save you tons of money.
A 529 plan is one of the best vehicles for funding your children’s college and freeing them from student debt. A life insurance plan they can also take advantage of is a great supplement.
Even if they don’t end up using the cash value for their education, it can work later as a down payment for a house, something most young people struggle to do without family help.
Should You Buy Life Insurance For Your Grandkids?
Life insurance for your children is a personal decision to be carefully weighed.
For a grandchild, life insurance is a lasting gift that can prove massively beneficial in their adult lives.
In the current economic climate, most young people struggle to achieve major life milestones without family help.
Recent surveys of millennial home-buyers show that nearly all have financial help from their families to put together the down payment. The same is likely to be true for upcoming generations.
A whole life policy offers cash value accumulation, which your grandchild can tap to help with college or the down payment on a home.
While parenting is extremely expensive, grand-parenting has fewer financial requirements.
If there’s money available to purchase and pay for a grandchild’s life insurance, it becomes a lasting gesture to boost their financial situation earlier in life than their peers.
The right choice for your child will depend on what you’re looking to accomplish and your family’s financial situation.
Whether you choose a rider or whole life policy, make sure to have your insurance agent shop the market.
Shopping for the right company and getting quotes ensures your child gets the best possible coverage at a minimal cost.