Unsure what a children’s insurance rider is?
A standard life insurance policy provides the foundation for coverage for an individual and his family. But it is not a one-size-fits-all product. Insurance riders offer the opportunity to tweak the protection of a policy to fit the insured’s personal situation.
It becomes especially evident if the individual has dependents. It adds a new dimension to what an insurance policy can and should deliver.
What Exactly Is A Children’s Insurance Rider?
Children represent a special situation, for example. More often than not, they don’t contribute to the household’s income. There isn’t a direct financial hardship as a result of the loss of a child.
But it doesn’t mean such a devastating event doesn’t have other repercussions. This where a children’s insurance rider or simply, a child rider, comes into play.
Buying insurance requires rational thinking and a pragmatic approach to planning for the future. When it comes to children, it borders on the unconscionable. It’s essential to realize the loss of a child carries financial costs in addition to the emotional stakes. Parents can take comfort in the fact a children’s insurance rider recognizes the unintended consequences for them as well.
How Does a Children’s Insurance Rider Work?
Most insurance companies offer children’s riders. One add-on provision will cover all the children in a household. 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.
The annual cost is less than $100 per year.
The child rider will have an upper limit on coverage usually around $20,000. Parents can pay the premium as a lump sum payment or opt for monthly installments instead. Unlike life insurance for a working adult, a children’s insurance 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. A parent will undoubtedly lose time at work to go through the grieving process. Undoubtedly, they will receive some paid time off.
Everyone experiences grief differently. 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 the extra time even if they don’t end up using it. There’s no need to add financial hardship to their burden.
Criteria for a 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.
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.
Insurers typically define maturity at age 25, but some may place the bar at age 21. Insurance coverage doesn’t necessarily expire after this time expires. Most insurance companies will allow the coverage to convert into an individual permanent insurance policy when the time comes. The advantage with this plan is that the child won’t be subject to a medical examination or other requirements.
The coverage for the individual whole life policy ranges at about five times the initial coverage of the rider. It will begin to accumulate on its cash value. The overwhelming advantage of this option is the insurability of the child if health problems could pose an issue to obtaining insurance coverage down the road. It’s an excellent option if there is a risk of a genetic condition.
These riders may also include an expiry age of the insured. The upper limit for the parent typically is 65 years of age but may be as high as 75 years. A children’s insurance rider will cover also cover adopted children.
The benefit of a children’s insurance rider is it is often more affordable than an individual policy. While it offers a parent peace of mind, a child rider is not for everyone.
Because of economic factors, some may deem life insurance 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. If there is a concern, a children’s insurance rider makes sense.