For many parents, especially those who are buying life insurance for themselves, it can make sense financially to consider a life insurance policy for a child. With the right type of policy, it can be a powerful tool to lock in low rates, guarantee future insurability, and even create a financial legacy. But should you get life insurance for your child? Is it worth it? Let’s break it down.
Why Some Parents Buy Life Insurance for Kids
While it may feel counterintuitive to buy a life insurance policy for someone who isn’t earning an income, there are a few strategic reasons why it might make sense.
1. Locking in low rates
Children are typically in excellent health, which makes them eligible for the lowest possible life insurance rates. Buying a whole life policy early locks in that rate for life, even if your child later develops a medical condition that might otherwise make life insurance more expensive.
2. Building cash value & leaving a legacy
A whole life policy builds cash value over time that grows tax-deferred. As the child grows, that cash value can be accessed to help with major expenses down the road, like college, a wedding, or even a down payment on a home. Many parents eventually transfer the policy to their child as a meaningful gift in adulthood—one that offers lifelong coverage and security.
3. Guaranteeing insurability for the future
Some policies come with a Guaranteed Insurability Rider, which allows your child to buy additional coverage later in life without needing to prove their health again. This is especially valuable if your family has a medical history that could make qualifying for insurance as an adult more difficult.
What Type of Policy Makes the Most Sense?
There are two main ways to insure a child, depending on your goals:
1. Whole Life Insurance for Children
A whole life policy provides permanent coverage, builds cash value over time, and locks in premiums for life. It also provides eligibility for dividends from the insurer (not guaranteed, but historically reliable), and often includes a Guaranteed Insurability Rider. While it requires a larger upfront investment than a CTR, it offers significantly more long-term value.
Who this is great for:
- Parents or grandparents focused on long-term planning and wealth-building
- Families who want to lock in low premiums now for lifelong coverage
- Those looking to give their child a financial head start, including early cash value accumulation
- People who want a policy they can gift to the child later as a stable financial asset
2. Children’s Term Rider (CTR)
This is a low-cost add-on to a parent’s term life insurance policy. It typically provides $5,000 to $10,000 in coverage for a nominal monthly fee. The CTR is designed purely for death benefit protection and doesn’t accumulate cash value. It’s a simple option that can be converted to a full policy later on.
Who this is great for:
- Parents who want basic, low-cost protection
- Families who already have a term policy and want to add child coverage without a new plan
- Budget-conscious households who want some coverage now with the option to convert later
- Parents who want an entry-level way to introduce life insurance for their child
When It Makes the Most Sense
We most often recommend life insurance for a child when a parent is applying for their own coverage, especially if the parent has health conditions that make their own premium higher. It’s a good opportunity to lock in coverage for a healthy child at a low cost, and provide them with a financial head start.
It can also be a powerful legacy move. A whole life policy gifted to your child when they become an adult can become a versatile financial asset with decades of growth behind it.
For more personalized assistance, schedule a call with one of our experts.
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While some argue that children are generally healthy and may not need life insurance, others see it as a proactive way to provide financial protection.
Ultimately, it’s about your family’s goals and financial situation. Buying life insurance for your child is not a necessity, but it can be a smart move in many cases.
Are you reading this while reassessing your coverage or as a first-time life insurance buyer? Either way, we encourage you to schedule a consultation with one of our experts. During this complementary 15-minute call, we’ll discuss your unique situation and create an action plan. We understand everyone is busy, so we offer flexible hours and keep the call quick and productive. Schedule now to get started!If you have any more questions like this, check out our blog! We regularly put out new articles answering questions about life insurance.
