Life insurance for children: an honest look

At a glance

Common form

Small whole life, typically $5,000 to $50,000, or a child rider on a parent’s policy

Main purposes

Guarantee future insurability; cover final costs; start cash value

Cost

Low, because the insured is young and healthy

Trade-off

Money spent here is not covering the parent, whose income the child actually depends on

What child life insurance does and does not do

Life insurance on a child is usually a small whole life policy or a rider on a parent’s policy. It does three things: pays a benefit in the unthinkable case, locks in the child’s ability to buy more coverage as an adult regardless of health (through a guaranteed purchase option), and builds a modest cash value.

What it does not do is protect the child financially. The child depends on the parents’ income, so most licensed professionals suggest making sure the parents are adequately insured first, then considering a child policy or rider if there is room.

Child rider vs. standalone policy

A child rider on a parent’s term or whole life policy is usually the least expensive way to add a small benefit for every child in the household, and typically converts to a standalone policy at a set age. A standalone whole life policy on the child costs more but is permanent and builds cash value in the child’s name.