What Is Child Life Insurance? – Best Life Insurance for A Child
What Is Child Life Insurance? Like a life insurance policy for an adult, a life insurance policy for a child is a contract with an insurance company. Premiums are paid (typically monthly or annually) in return for the promise that the insurance company will pay a death benefit if the child dies.
With an insurance policy for an adult, the policyholder typically is the insured person—the one who is covered by the policy. With a policy for a child, the child is insured, but a parent, grandparent or legal guardian is the policyholder. The policyholder also can be the beneficiary who receives a payout if the insured child dies.
Life insurance policies for children typically are whole life insurance policies, which means they will provide lifelong coverage as long as premiums are paid. Premiums tend to be guaranteed, so they won’t increase over time. Plus, a portion of the premium goes toward building cash value, which can be accessed while the child is alive for any reason.
You can’t buy a term insurance life policy for a child, which would provide coverage only for a certain number of years. However, if you buy a term life insurance policy for yourself, you might be able to add a rider to cover all of your children until they reach a certain age, at which time the coverage likely can be converted to permanent policies for them at an additional cost.
What Is Child Life Insurance? (Explained)
Child life insurance is a form of permanent life insurance that insures the life of a minor. It is usually purchased to protect a family against the sudden and unexpected costs of a child’s funeral or burial and to secure inexpensive and guaranteed insurance for the lifetime of the child. It offers guaranteed growth of cash value, which some carriers allow to be withdrawn (collapsing the policy) when the child is in their early twenties. Child life insurance policies typically offer the owner the option to purchase, or in some cases obtain additional guaranteed insurance when the child reaches maturity.
Child life insurance policies typically:
- Are issued with face values between $5,000 and $50,000.
- Are always issued without a required medical examination.
- Have zero investment and zero interest rate risk associated with cash value growth.
- Provide insurance coverage for a designated beneficiary.
Child life insurance should not be confused with juvenile life insurance, which is issued with much larger face values (normally $100,000–$10,000,000) and is generally purchased for college savings, lifetime savings, estate planning and guaranteed insurability.
The 6 Best Life Insurance for Children of 2021
- Best Overall: Mutual of Omaha
- Best for Whole Life Coverage: Gerber Life Insurance
- Best for Term Coverage: State Farm
- Best for Versatility: Foresters Financial
- Best for Affordability: Thrivent
- Best for College Students: Globe Life Insurance
Should I Buy Life Insurance for My Children?
As a financial investment, children’s life insurance is not always a necessary choice because child mortality rates are so low and the whole life policies offered usually have a poor rate of return. If peace of mind is important to you, and the cost of funeral and burial may be hard to afford, then the most cost-efficient option—a simple term rider for $10,000 to $30,000 attached to the parent’s life insurance policy—should suffice for this instance and at rates of around $50 per year for all children in the family (as available with State Farm), this solution is hard to beat.
Children’s life insurance is easy to get, with few questions asked and no requirement for a physical. For children with health problems, who may be uninsurable as adults, or who enter professions that are uninsurable, children’s life insurance is incredibly important because after the policy is written there will never be a requirement to provide proof of insurability again.
What Does Life Insurance for Children Cost?
Generally, children’s life insurance is inexpensive. Here is a run-down of the typical costs:
- Term: This is the least expensive insurance and typically only offers coverage of $10,000 to $20,000 per child. Term insurance is not a policy written in the name of a child, but is a rider to a parent’s life insurance policy that covers all children, even children born after the policy is initiated. For instance, the cost of a rider with State Farm is around $50 per year, regardless of the number of children in the family.
- Whole Life: By comparison to a term-life insurance rider, whole life is more expensive, but compared to whole life insurance for an adult who initiates a policy at say, age 35 or 40, the cost is incredibly low. Whole life children’s policies generally offer coverages of $5,000 to $50,000 with some policies capping out lower and some higher. For a newborn in most states the cost for this range is about $30 to $200 per year, with the companies here as low as $2.17 per month.
Normally these policies require very little information beyond name, date of birth, sometimes gender, and the resident state. Usually, there are no questions about medical conditions and no physical or medical examinations required.
How We Chose the Best Life Insurance for Children
While many aspects of the whole life policies and the term riders are the same across insurers, there are differences that will draw you to one or a few insurers in particular versus others. We looked at about fifteen insurers and focused the criteria that matter most when shopping around for children’s life insurance, including the financial strength of the company, the cost of the plans offered, and the ease of applying for and initiating the policy.
After these common points, we called out aspects that were unique, such as:
- The age for all insurers except one was two weeks to 17 years, but Globe Life Insurance is the only insurer that will write new policies for children ages 18 to 24.
- All coverages are for a fixed amount that you select for the life of the policy, except Gerber Life who doubles the coverage automatically at no additional cost when the insured arrives at age 18.
- Thrivent offers very low rates and is one of the most financially sound insurers, but will only write policies for Christians.
From there, we picked the six final best life insurance companies for children included here to help you in your selection process.