Unsure what a children’s insurance rider involves, or why you should consider one in the first place?
A standard life insurance policy provides an ideal foundation for coverage and financial peace of mind for the insured and their families.
But, life insurance policies are never a one-size-fits-all product.
For this reason, insurance policies are often tailored to fit the unique needs, budget, and lifestyle of policyholders.
Life insurance riders offer an additional opportunity to tweak the protection of a policy to fit the insured’s personal situation.
They add a new dimension to what an insurance policy can and should deliver for policyholders.
Individuals may want to seriously consider attaching a children’s insurance rider to their base policy if they have young dependents.
What Exactly is a Children’s Insurance Rider?
Children represent a special situation when it comes down to insurance.
More often than not, kids don’t contribute to the household’s income, meaning they typically do not need to be covered by life insurance.
Policyholders do not undergo direct financial hardship as a result of losing a child, but the unforeseen death of a loved one can be quite tragic for any family.
However, this doesn’t mean such a devastating event would not have other repercussions that must be taken into account.
This where a children’s insurance rider, or a child rider, comes into play. In exchange for a minimal premium, this rider provides grieving families with a small death benefit that can help cover any final expenses, such as funeral costs.
The children’s insurance rider gives families the opportunity to take a deep breath and focus on coping with their loss instead of worrying about any mounting bills. This rider can also help families circumvent having to take out a separate life insurance policy for their children.
Buying insurance requires rational thinking and a pragmatic approach to planning for the future without always knowing what’s in store.
For many families, thinking about unexpectedly losing a son or daughter borders on the incomprehensible. Despite the heaviness that comes along with considering a child rider, it’s essential to realize how a child’s death carries financial costs along with high emotional stakes.
Parents can take comfort in the fact that a children’s insurance rider purposefully recognizes the unintended consequences for them as well.
How Does the Children’s Life Insurance Rider Work?
Most life insurance companies offer children’s insurance riders. Traditionally, a single add-on provision should cover all the children in a household, including any future additions.
These riders work differently than regular life insurance because they are sold in units of $1,000 worth of coverage with a per unit price. They are not expensive, typically falling in the range of under $10 per unit.
Annual costs are no more than $100 per year, which is great for families on a tight budget.
The child rider will have an upper limit on coverage, usually around $20,000.
Parents can pay the insurance premium as a lump sum payment or opt for monthly installments instead, no matter how many children you’re needing to insure. Unlike life insurance for working adults, a child rider usually covers the cost of a funeral and burial of the deceased only.
However, there are indirect costs of losing a child which can affect the amount of coverage a policyholder may opt to purchase.
Some insurance companies may require policyholders to attach the child rider at policy origination, while others may allow the insured to add-on the rider later on down the road.
A parent will undoubtedly lose time at work to go through the grieving process. They will receive some paid time off to cope with the loss of their loved one.
Everyone experiences grief differently, though, so a parent may need more time than the few days their employer will offer.
Since the rider is relatively inexpensive, it makes sense for a policyholder to err on the side of caution and add the extra units to give them the latitude to take extra time, even if they don’t end up using it.
After going through such a tragic experience, there’s no need to add financial hardship to their burden.
Criteria for the Children’s Insurance Rider
Most insurance companies will begin coverage on a child at 15 days of age. However, it may also begin well after birth.
The upper limit on the issue age is usually around 18 years old, but may vary between 17 and 22 ½ years, depending on the insurer.
These riders may also include an expiry age of the insured. The upper limit for the parent is typically 65 years of age, but may be as high as 75 years.
There is also an expiration date on the rider, which occurs at the age of maturity. Again, the child expiry age varies with the plan chosen.
Insurers typically define maturity at age 25, but some insurance providers may place the bar higher at 21 years of age. Insurance coverage doesn’t necessarily expire after this time expires, though.
Most insurance companies will allow coverage to convert into an individual permanent insurance policy when the time comes.
Sometimes the converted policy can end up being three to five times greater than the rider’s initial coverage amount.
For instance, if you’ve secured $15,000 in child rider coverage, the conversion could equal $45,000 or more in permanent child coverage.
Always speak with your insurance carrier regarding your policy’s age of maturity so you don’t encounter premature coverage termination.
However, some states cannot offer the child rider in light of certain state insurance regulations. If you want to supplement your insurance policy with this provision, first check with your insurance provider regarding state availability.
The advantage of this plan is that the child won’t be subject to a medical examination, and little to no underwriting is involved.
But, some carriers may require parents to answer some medical questions related to their children, such as if any have pre-existing conditions. The child rider is an excellent option if there is any risk of genetic conditions.
As mentioned earlier, the coverage for the individual whole life policy ranges at about five times the initial coverage of the rider. It will also begin to accumulate on its cash value.
A children’s insurance rider will cover adopted children and stepchildren.
Final Thoughts on the Children’s Insurance Rider
Whether we like it or not, sometimes families must unexpectedly go through the tragic loss of a child.
Thankfully, the children’s insurance rider will provide grieving family members with a small death benefit to help pay for unforeseen final expenses.
One of the greatest advantages of a children’s insurance rider is it is often more affordable than taking out a completely separate insurance policy.
The overwhelming advantage of this option is the insurability of the child, especially if health problems could pose an issue when obtaining insurance coverage down the road.
While it offers parents valuable peace of mind and an extra layer of financial protection, a child rider is not the best option for all families.
Due to economic factors, some individuals may deem taking out life insurance policies on children as unnecessary.
After all, health insurance will cover the illnesses and injuries a child may have.
However, the decision rests on the future insurability of the child in question. If there is any concern, the children’s insurance rider makes perfect sense.