Deciding Whether Life Insurance for Children Is the Right Choice

Life insurance is often thought of as something adults purchase to protect their families in the event of an unexpected death. But what about children? Some parents wonder whether buying life insurance for their children is a wise choice. It can feel unusual to think about life insurance for a child, but there are reasons families consider it.

Why Parents Consider Life Insurance for Children

The idea of buying life insurance for a child may seem unnecessary at first. After all, most children do not contribute to the household income. Yet parents often look at life insurance for their children for three main reasons:

1. Final expenses: While heartbreaking to think about, life insurance can help cover funeral costs and related expenses if the worst were to happen. Even a small policy can help relieve financial stress during a devastating time.
2. Future insurability: Some policies for children allow them to keep coverage for life or convert it into an adult policy later. This can be valuable if the child develops health conditions in the future that might otherwise make coverage hard to get.
3. Savings component: Certain permanent life insurance policies build cash value over time. Parents may view this as a way to start saving for their child, though it is not always the most efficient savings tool.
4. Alternative to a savings bond: Instead of a traditional savings bond, many families choose a juvenile whole life insurance policy. It not only grows in value over time but also provides tax advantages and in many cases the option to borrow against the cash value when needed.

The Potential Advantages

There are situations where life insurance for children offers real benefits. These include:

• Locking in low premiums: Premiums for children are often very low, and buying early can keep those rates locked in for the long term.
• Providing a financial safety net: While money cannot ease the loss of a child, a policy can cover unexpected costs and give parents space to grieve without worrying about expenses.
• Protecting future access to coverage: A child who develops a medical condition may have limited options as an adult. A permanent policy purchased in childhood can guarantee they carry coverage into adulthood.
• Building cash value: Some parents appreciate that whole life policies grow over time. This cash value can easily be borrowed against for any purpose, whether to handle a family financial emergency or for the child’s major life expenses, like college, downpayment on a home or to help pay for their wedding, for example.
• Guaranteed return: Unlike volatile stocks, bonds and mutual funds, the growth of cash value within a life insurance policy is guaranteed by the insurance company.

The Drawbacks to Think About

Despite these potential advantages, there are several drawbacks parents should weigh:

• Children do not have dependents: The main reason for life insurance is to replace lost income for dependents. Since children generally do not provide income, the financial need is often minimal.
• Opportunity cost: Money spent on life insurance premiums might be better directed toward college savings accounts, investments, or family needs.
• Relatively lower investment returns: The cash value growth of permanent policies is more predictable but usually lower than some other savings vehicles, especially those that invest in stocks. Parents looking to build wealth for their child’s future may want to explore alternatives like a 529 plan or custodial investment account.
• Emotional difficulty: Some families find it uncomfortable to even think about buying life insurance for a child, making the process stressful.

Types of Child Life Insurance Policies

If you decide to move forward, it is important to understand the options available:

• Whole life insurance: This is the most common type for children. It provides lifetime coverage as long as premiums are paid and may build cash value.
• Term riders on a parent’s policy: Some companies allow parents to add a child rider to their own policy. This usually provides a small death benefit at a lower cost than purchasing a separate policy.
• Standalone term life insurance policies: These are rare for children but may be available through certain insurers.

When It May Make Sense

Life insurance for children is not right for everyone, but there are scenarios where it could be useful:

• Parents that already have life insurance on themselves and want additional coverage options.
• Parents concerned about hereditary medical conditions that could affect future insurability.
• Families that want to establish a financial asset for their child that includes both coverage and savings elements.
• Grandparents wanting to help build a financial foundation for their grandchildren.

When It May Not Be Necessary

For many families, life insurance for children is not essential. If you already have emergency savings, college savings, or strong coverage for yourself as a parent, adding a child policy might not provide much extra benefit. Remember, your own life insurance is often more critical because it directly protects your children and other dependents if something happens to you.

What Life Insurance For Children Costs

Below is a table showing a sample of the estimated monthly cost of a variety of coverage amounts for two types of child’s life insurance: Whole Life Insurance and a Term Rider on a Parent’s Policy. 

Child’s age at time of purchase	Whole Life Policy in Child’s Name						Term Rider on a Parent’s Policy
	$10,000	$20,000	$30,000	$40,000	$50,000	$100,000	$5,000	$10,000
Newborn	$5.64	$9.10	$12.56	$16.03	$19.49	$28.62	$2.34	$4.68
5	$6.14	$10.11	$14.08	$18.04	$22.01	$33.67	$2.34	$4.68
10	$6.80	$11.43	$16.06	$20.69	$25.32	$40.19	$2.34	$4.68
15	$7.64	$13.10	$18.57	$24.03	$29.49	$48.63	$2.34	$4.68

Notes:

The Whole Life Policy cost may be subject to underwriting and in this example is estimated using the popular Pay to Age 100 option (a type of permanent life insurance where you pay fixed, level premiums until you reach age 100).

The Child Term Rider cost is frequently the same no matter how many children are covered. 

Alternatives to Consider

A child’s whole life insurance policy can be a modern alternative to buying a savings bond. It offers competitive long-term returns, favorable tax treatment, and the flexibility for parents—or the child later on—to borrow against the cash value if needed.

Before purchasing child life insurance, explore other financial strategies that may better fit your family’s goals:

• College savings accounts: A 529 plan offers tax advantages and may provide a stronger return on investment.
• Emergency funds: Having liquid savings can cover unexpected expenses without tying money up in an insurance policy.
• Adequate parental coverage: Making sure parents have the right amount of life insurance is often a higher priority.

Get a Quote for Life Insurance for a Minor

Buying life insurance for children is a deeply personal decision. It offers some unique benefits, like protecting future insurability and covering final expenses, but it also has some drawbacks. For most families, it may be more practical to focus on building savings and securing sufficient coverage for parents first.

Ready to receive a quote? Schedule a one-on-one conversation with one of our licensed experts here. Our team is salary-based with no commissions, so you can feel confident knowing their advice is focused on what’s best for you and your family—not on meeting a sales quota.

Looking to purchase a policy for yourself or another adult? Everyday Life Insurance is here to make the process simple—check out our online Life Insurance Calculator.