Do You Need Life Insurance for Children?


  • When discussing life insurance, the importance of considering coverage for children is often overlooked. It is encouraged to explore life insurance options for children, as it can bring substantial benefits in the future.
  • Child life insurance is a permanent policy typically purchased by parents or grandparents to cover the child’s entire life, extending into adulthood. While coverage amounts are modest, the premiums are fixed, especially in whole life insurance policies. The child gains ownership of the policy at age 18 or 21, with the option to continue or cancel.
  • The preferred option for children is permanent participating whole life insurance, offering the advantage of building cash value over time. Standalone term life insurance policies are unavailable for children. Whole life insurance is favored for its ability to accumulate cash value.

Should I Purchase Child Life Insurance?

When discussing life insurance policies, your children’s life insurance might not automatically come to mind. However, we encourage you to consider life insurance for children as it can greatly benefit their lives in the future.

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What Is Child Life Insurance?

Child life insurance is a life insurance policy purchased usually by a parent or grandparent to cover the life of a minor. In general, child life insurance is a permanent policy that covers the child’s entire life, even into adulthood. Coverage amounts are usually low, but the premiums are also locked in and won’t go up as the child grows up if the policy is a whole life insurance policy. Depending on the policy, the child will take ownership of the policy at age 18 or 21, and then they can decide to continue the policy or to cancel it. 

How Does Children’s Life Insurance Work?

While there are different types of life insurance policies, the best child life insurance policies are permanent participating whole life insurance policies. Term life insurance is an option for adult life insurance but is unavailable to purchase as a standalone life insurance policy for your children. Most insurance companies don’t offer term life insurance to those under the age of 18, but you can add a small amount of term coverage for your children on your own term life insurance policy through a children’s insurance rider if you choose. Whole life insurance is the preferable choice because whole life insurance offers the ability to build cash value

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Many people believe that child life insurance is most valuable for the parent or whoever the beneficiary would be, but that is not the only benefit for child life insurance. While there is a death benefit (the money typically meant to cover funeral costs and other expenses that are given to the beneficiary) included in these policies, there are many other advantages that benefit the child and their future. 

The Pros of Life Insurance for Children

If you are deciding whether or not you should insure your child, here are four reasons why child life insurance policies are useful for children during their life.

  1. Protect your child’s insurability:
    Thousands of children every year are diagnosed with conditions that will prevent them from being able to obtain the life insurance policies they will need as adults. By insuring your child as early as 15 days into their life, you can lock in their ability to be insured regardless of what may happen to their health in the future.
  2. Guarantee low costs:
    Premium costs for young children are significantly lower than adult rates so getting a policy started for your child while they are young is a small expense for you now that will equate to huge savings for your child later. 
  3. Ensure they can purchase additional coverage later in life:
    By insuring your child at a young age, you can take advantage of many policies’ guaranteed insurability rider. This Guaranteed Insurability Rider (GIO) means your child will be able to increase their life insurance coverage at designated times in the future, without being required to pass a health exam.
  4. Provide cash value and savings along the way:
    Permanent whole life insurance for kids also has the bonus of cash value which some people like to think of as a savings component. Cash value is the equity they’ll have in their life insurance policy. Equity grows over time and the best part is that it is accessible to you and/or your children during their lives. Cash value is one of the best “living benefits” of whole life insurance.

Common Arguments Against Buying Life Insurance for Children

While some advisors and financial planners tell parents it’s not necessary to insure their children because of the added cost and low short-term return, it actually can save you and your child money in the future and provide many benefits to them later on in life. Here are a few common arguments against buying life insurance for children and why we generally disagree with them.

  1. There are so many fees that the savings vehicle isn’t worth it:
    This argument against buying life insurance is valid about universal life insurance or IUL (indexed universal life) but not true for whole life insurance. We recommend whole life insurance for children because it has better benefits. There is a fixed policy fee with whole life insurance but it is low because it is not based on a percentage of the policy premium.
  2. Investments and other similar options can accrue more money faster than cash value in life insurance policies:
    Could you save more by investing or doing something else with your money? Possibly. The stock market is an ever-changing game though nobody knows what it will do next. If a parent is inclined to invest money for their children that’s fine, but we also encourage them to provide certainty by getting life insurance too.
  3. The odds of your child passing away and you needing the death benefit is slim:
    This is a true statement. Parents hope they never have to use the death benefit of a child life insurance policy, but aside from the living benefits that a child’s life insurance policy provides, we believe that no parent should ever have to face financial stress because of the loss of a child.

Is Purchasing Child Life Insurance a Wise Decision?

There are specific scenarios in which it might be beneficial for you to consider acquiring a child life insurance policy. Two crucial considerations include:

  1. Does your child have a medical condition that will have lasting implications throughout their life?
  2. Does your family possess a medical history that could pose early-life risks for your child?

If you responded affirmatively to either of these inquiries, it could be prudent to further explore the optimal life insurance choices for your child.

Frequently Asked Questions About Child Life Insurance

If you’re still on the fence about child life insurance, here are some other frequently asked questions that will help you in your decision-making process.

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How Much Does A Policy Cost?

In many cases, the price to insure a young child under the age of one is not even a dollar a day for $50,000 in face-value coverage. McFie Insurance can provide a free quote if you’d like a better idea of the cost associated with insuring your children.

Who Is The Policyholder?

With life insurance for adults, the policyholder is often the person who is being insured and covered by the policy. With life insurance for kids, a parent, grandparent, or legal guardian would be the policyholder, even though it is the child who is being insured.

Get Child Life Insurance With McFie Insurance

If you have other questions about buying life insurance for children or want to know how to set up the best life insurance policy to get the most cash value for your children to use throughout their lives, we are here to help. Schedule a free appointment, and we’ll help you make the right decisions for your kids’ life insurance.

Ben McFieBen T. McFie

There's a lot of confusion around finance; there's so much to know and it's frustrating when you don't know enough to make the best financial decisions. I like to bring clarity to financial matters so people can make good financial decisions that will help them live wealthier more fulfilling lives.

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