Life Insurance for Children

My Story

It’s been over 10 years now, but I still remember (and am haunted by), an episode of Law and Order. A family had adopted a child and then some time down the road, the child was killed in a shooting that took place at the school. During the investigation, they noticed the parents didn’t have any pictures of the child up or any of the artwork up in the family home (showing no attachment to the child). After many twists and turns, they find out the parents adopted the child with the plan of insuring them with a high dollar insurance policy and the having the child killed. That hurt my heart. They adopted that child with the intent to kill them. Thank God it was television show.

Why Insurance is Important for Children

Parents do need to insure children for life insurance. The bible says, it’s appointed that all of us are going to die. You need money for final arrangements at the least. I have witnessed multiple instances of parents collecting money for the burial of their child. I know all parents hope their children will outlive them and grow up to live long happy lives, but we just don’t know.

 

I was taught, children need enough for a funeral and burial- not enough for parents to get rich off of. And that parents should be benefit from the death of their child.

Child Riders

You can add to your own term life insurance policy or permanent life insurance policy, a child rider for $10,000 or $15,000, very cheap. When your child becomes of age, they can sometimes increase their portion of the policy at the time they assume the policy. They would then be responsible for owning their own policy and payments and would no longer ride or mommy and/or daddy’s policy.  

You can get a higher coverage amount if you want to protect against possible end of life expenses. There’s no way to know if you may have medical bills that result because your child develops an illness or injury prior to their passing. I’m sorry we even have to talk about such difficult things.  Normally, child riders do not offer the option of using a portion of the benefit for critical, chronic, or terminal illness, like the adults on the policy. Child riders just provide death benefits for the worst-case scenario- your child dies. The death benefit paid out will cover their funeral, burial, and any other expenses that result.

Term Life Insurance Riders

One insurance company sells only term life insurance. They cover all eligible children for one dollar amount (which is great) and allows children who turn 25 to get individual term coverage (with no medical exam) at up to five times the original coverage amount. Because your child would still be young, they can 

still get a great rate. Once this child has their own family, that amount is not likely going to be enough. He or she will likely need another policy- which they may or may not be able to get depending on health.

 

Permanent Life Insurance Riders

With other insurance companies, child riders end or can be converted to permanent insurance. Children who come of age (as young as 18 and as old as 25- depending on company) can convert to permanent coverage (with no medical exam) at up to five times the original coverage amount. It will cost a lot more, but your child is automatically guaranteed coverage even if they have an illness and may not otherwise be able to find coverage elsewhere. That could be a compelling reason to convert that term child rider to permanent insurance. In addition, it the cost will be as low as it will ever be. Insurance costs only go up as individuals age.

Child Life Insurance

You can also get a child life insurance policy which is different than a rider attached to a parent’s policy. It’s a permanent life insurance policy for the child as the primary insured and costs much more than a child rider. It builds cash value in addition to paying out a death benefit. There are a variety of whole life and universal life (both permanent insurance categories), options available.

Cash value can be borrowed against to fund education, a new home, or retirement. You cannot borrow the entire cash value without surrendering the policy- ending the policy. If money is borrowed, it is not required to be paid back, but the faced value of the policy will go down. That means, if the child dies, the amount paid to beneficiaries will be less that what might be expected. There are plans that you can “pay up” and these days, a whole lot more flexibility that used to be the case.  

Cash value can be borrowed tax free, but not interest free. The borrowed money is treated like a loan. You still accrue interest on the amount that remains in the policy so one could wash the other as in the interest owed on the loan could match the interest gained on the remaining cash value. The interest gained could even exceed the interest owed. You’ll need to discuss those details with your agent and ask for an illustration that shows exactly what you should expect.

Conclusion

Life insurance can be a confusing topic. If you have nothing in place, term insurance is straight forward coverage at a cheap rate. It’s fairly east to secure, but it does come as a rider on an adult policy. That means, you need insurance for yourself first. If you don’t start work on that today.

There’s a lot of information out there and plenty of people like me, that you can talk to. But bottom line is insurance is one of those things you have to have in place before you need it. The sooner you get started, the sooner you can check off this very important to-do. Make sure your family is properly protected. CLICK HERE for a free quote.