Child life insurance provides a death benefit to parents or guardians, covering expenditures connected with a child’s death. Most individuals buy it for this reason, or to lock in a cheap rate on a policy that, in some situations, can provide coverage for life.
How Does Child Life Insurance Work?
Parents, grandparents, or guardians can get child life insurance to protect against the sudden death of a minor or young adult. Some kid or juvenile insurance plans give smaller coverage levels than a funeral or burial insurance policy (usually $25,000), whilst others provide more intricate permanent policies that increase cash value or provide additional coverage.
You may also be able to purchase a children’s term rider for your existing policy, which will offer a limited amount of coverage to all of your children. When the kid reaches adulthood, the rider is frequently turned into a permanent insurance policy.
Child life insurance is often provided for youngsters as young as 14 days old and can last throughout the child’s mid-20s.
For example, a parent may add a kid to their family insurance using a children’s term rider. One rider might cover all of the children in the household, offering $10,000 to $20,000 in coverage for each kid. When the youngster reaches the age of 25, his or her coverage can be converted to an adult insurance without a medical evaluation.
Note
Child insurance is primarily designed for unmarried adoptive or biological children or grandkids who are not financially self-sufficient.
Costs vary greatly depending on the type of coverage (whole life or term) and whether you get the insurance via your workplace or on your own.
Eligibility
For kid life insurance, insurers seldom need a medical or physical exam. However, the application process may contain questions about risk management and safety. Your responses to these questions determine whether or not the insurer will give coverage.
Insurers may have extra rules, such as:
Sibling coverage amounts must be comparable.
One or more parents or guardians must have the same or greater quantity of coverage.
Policyholders must be US citizens or holders of a valid visa to live in the United States.
Note
Additional parental scenarios, such as a recent bankruptcy, high-risk hobbies, or a felony conviction, may prompt the underwriting department to conduct a more thorough investigation.
Coverage amounts
Coverage amounts begin around $5,000 and can climb to $25,000 or much more.5 Policy maximums from typical life insurance companies might be in the millions, depending on the insurer. However, these plans sometimes require parents to have equal or larger life insurance coverage.
State legislation limits maximum quantities in places like Washington and New York. In New York, children aged 4 ½ to 14 ½ cannot be insured for more than $25,000, or half of the policy owner’s insurance.6
Changes in state legislation might affect child life insurance payouts. In some states, the insurer may withhold a death benefit if the death is caused by suicide or happens within a certain time range, such as two years after the policy’s commencement date. The premium may be returned, but no payment will be sent.
Types of Child Life Insurance
Child life insurance may have several names depending on the insurer, but the most popular varieties are term and whole life.
Term Child Insurance
Term life insurance lasts for a set length of time, usually until a certain age is attained. The expense of covering the child remains consistent throughout the period.
Term insurance for children is frequently accessible through a kid insurance rider, which you may add to your life insurance policy as a parent or grandparents. If obtained as a rider or addition to your existing policy, the coverage normally lasts until your kid becomes 21 or 25, depending on the insurance carrier, and you may be able to cover numerous children with a single price.
After the period expires, coverage may lapse. If your child is still a minor, you may apply for new coverage for them. Adults can apply for their own policy. You may also be able to upgrade your child’s term insurance to a permanent policy, such as whole life or universal coverage.
Whole Life Child Insurance
Whole life child insurance is a sort of permanent insurance that can offer coverage for the kid’s whole life, as long as payments are paid. It includes a cash value account that increases as your kid grows and may be borrowed against (at interest) or paid out when the policy is cancelled.
While whole life is somewhat more expensive than term life insurance, rates for both types are far lower for a kid when they are young than for an adult. The premium is cheaper for insured people who are younger.
One advantage of covering your children’s whole lives is that you may lock in a cheap rate and ensure that they have insurance for the rest of their lives. As long as the payments are paid, the coverage will remain in effect as the kid ages, regardless of any health difficulties that may arise.
Depending on the policy, your kid may be able to purchase higher amounts in the future and earn profits to use for further coverage.
Note
If your child sells the insurance for cash, they will most likely be required to pay tax on any sum above the total amount paid in premiums. Taking loans and partial payments may also result in penalties, charges, and a lower death benefit.
How to Get Child Life Insurance
Children’s insurance can be acquired directly from an agent or insurance firm, added to your existing life insurance policy, or obtained via your employer. Typically, the policyholder must be a parent, grandparent, or legal guardian until the kid reaches adulthood.
To obtain kid life insurance, you must apply for it. You may also be required to sign a release allowing the insurer to access your child’s medical records. The insurer may include exclusions for previous conditions such as hospital, neonatal ICU, or mental hospital admission, as well as chronic disorders such as heart, lung, or kidney disease, cancer, and diabetes. Insurers may inquire about teen driving offenses, a suspended license, or a history of driving under the influence.
A few states, like Washington and New York, have precise laws governing child life insurance. In Washington, for example, minors must be at least 15 years old to sign an application for life insurance.
Some kid life plans provide low teaser rates for first coverage. Read the small print for your state to find out whether your rate may rise. When the teaser rate ends, the child’s current age often sets a monthly premium that remains constant throughout the policy’s length.
Here’s a comparison for $10,000 of coverage.
INSURER: Type, Cost, and Number of Children
GerberWhole life planApproximately $7-12 each month.1. Banner: Child rider on term policy.Approximately .50 per month.Every child in the household
Employee-provided plans Child-term policy Monthly cost ranges between 32 cents and .20.1. Do I Need Child Life Insurance?
The answer to this question depends on why you’re buying a policy. If you’re seeking for low-cost insurance coverage to cover burial or cremation costs, a term rider added to your current policy or via your employer is frequently an economical option.
If the tax-deferred cash-value component of whole life insurance appeals to you, look around and ask the insurance firm for an illustration that shows cash-value performance over time. This allows you to compare it to other investments you may make for your child, such as a 529 savings account.
However, keep in mind that this is not intended to be an investment; rather, it is insurance. In addition, such policies or riders incur insurance and administrative expenditures. It’s completely feasible that those fees may outweigh the benefits you want to gain from the coverage. As with any permanent life insurance policy, inquire about policy expenditures, and be particularly wary of substantial surrender charges that may apply if you cancel the policy before a specific number of years.
Why get life insurance for a child?
Getting life insurance for your child might help ensure that your family has a safety net in case your youngster dies. Having such a coverage may also result in cheaper life insurance premiums once they reach adulthood. Consult with a financial counselor about the ramifications of acquiring life insurance while your kid is a minor.
What’s the distinction between kid life insurance and child insurance riders?
Life insurance for children is different from a child insurance rider, which is an extension of your or your partner’s life insurance policy that provides a minor death benefit if your kid dies. A kid rider is less expensive and may frequently be turned into a separate, permanent insurance for your child once they reach adulthood.
Does kid life insurance need a medical exam?
Insurance companies seldom require a medical or physical exam for kid life insurance. However, applying for this coverage may include answering questions concerning risk-related health and safety issues. Based on these responses, the insurer determines whether to provide an insurance.
