If you are interested in exploring your options for life insurance for children, you came to the right place. There are many different selections based on your need, budget and health of the child. In this post, we will go over the 3 ways you can secure a policy on a minor. We will also explore the pros and cons of each one of them.
Please keep in mind that you can always reach out to us or fill out the instant quote form to get the most up to date information on securing a life insurance policy for your kid.
1. Life insurance through parent’s employer coverage (through work)
This may not be very a popular option and many people may not be even aware that it is available. Typically, during the annual enrollment period (check with your Human Resource department when that is for your company) employees are able to upgrade their coverage. As one of their choices is the option to add life insurance coverage for them and their family.
Pros: This is a very affordable option to secure life insurance for your children. In many cases, you are looking for a few dollars’ worth of premium in exchange for coverage for your kids. This is a good option for people with multiple kids or children with pre-exiting condtions.
Cons: Typically, you can purchase only a small amount of coverage. This will range from a company to company, but a standard coverage is around $5,000 -$10,000 per child. Another drawback is that this policy may not be portable. For example, if you change your job, you may lose the coverage and leave your children without life insurance.
2. Life insurance for children as a rider on the parents’ life policy
Before we go over this option, we would like to clarify the term rider on a life insurance policy. A rider is basically an add-on option to a life insurance policy. It allows you to customize your policy based on your needs. For example, some of the most common riders are Term Conversion Rider, Waiver of Premium Disability Rider, Terminal Illness Rider and etc.
With a child rider on their life insurance policy, parents are able to provide coverage for their little ones at a very reasonable rate. This rider is available on almost all types of policies. Different companies have different options and prices for it.
Please keep in mind that the child rider needs to be added at the time of the application.
Pros: A child rider on parent’s life insurance policy provides reasonable coverage for an affordable rate. In most cases, there are no health questions for the kids. This may be a good and only option for a child, who due to a medical condition, such as cancer,epilepsy, leukemia, Down syndrome and etc., and can not be insured under a stand-alone policy. This option also allows parents to insure multiple kids for a fraction of the rate of an individual policy.
An additional benefit of this option is the child’s ability to convert the child rider into an individual policy. This is typically done without having to prove insurability. In other words, he or she can purchase a new policy at a certain age without undergoing any medical underwriting. This benefit alone may be the best reason to consider adding this rider to your life insurance application.
Please keep in mind that the option to convert may not be offered by every company. You need an experienced agent to help you select the option that best fits you and your family’s needs.
Cons: The biggest negative in this option is that some people let their policy lapse and lose the coverage for their children. Also, this is not very well known rider and not a lot of parents are aware that is available.
Another negative to consider is that not every company offers the possibility of conversion. Even if they do, in many cases the new policy may be with a small coverage amount and leave your child underinsured when he or she grows up.
3. Life insurance for kids as a stand-alone policy
This is the final option that we will explore. Before we go into more details, we would like to take a minute and go over the types of policy you can select from:
∗ 10 or 15 Pay life insurance policy – basically, this type of policies are whole life policies. Their best feature is that you can pay them in a span of 10 or 15 years. This is a very good option when considering life insurance for children. Once they become adults, you can give them a policy paid in full instead of an “another monthly bill”. It is more likely they keep the policy vs. letting it expire.
∗ Permanent insurance – with this type of policy you can ensure your kids and “lock-in” their premiums based on their age. It is a less expensive option than the 10 pay policy.
∗ Term insurance – it is not very common to consider a term policy when purchasing life insurance for children. However, there are some instances where a term product can be very beneficial, especially since it is the most affordable option out of the three. For example, you have a child who is going away for college and you co-sign or his or her student loans.
Now, since we went over the types of policies, let’s turn out attention to the pros and cons when buying life insurance for children as a stand-alone policy.
Pros: Typically, it offers the highest coverage amount option. You can purchase insurance for your child for as little as $5,000 to as high as $1,000,000 or more (subject to financial needs analysis and parent’s coverage review). Choosing this option, you can rest assured that your child is covered and doesn’t have to worry. If he or she happens to develop some medical issues down the road, the policy you got for them will always be available.
Cons: It is the most expensive option out of the three discussed. There will be underwriting involved. In other words, based on the coverage amount and type of policy selected, the company will ask you some health questions about your child. In case he or she has a certain medical condition, this option may not be available.
If you are not sure which option is available to you and your family, please reach out to us. We are here to answer any questions you might have and guide you through the process.