LIFE INSURANCE FOR CHILDREN: Best Policies For Kids

Life insurance for children
Forbes

We all want our children to live long and healthy lives, which is why child life insurance may not be a high priority for you. However, it is worth considering because it can lock in cheap rates and serve as an investment vehicle for your children.
Find out more about this sort of life insurance and whether you should buy it for your children.
Our list of the best life insurance for children includes businesses that provide independent term and whole life insurance plans for children rather than riders, which typically expire when the child reaches the age of majority.

What is Child Life Insurance?

Child life insurance does not refer to any specific form of policy; you cannot purchase a policy just for your children. You can, however, add your children to your own life insurance policy by purchasing a children’s critical illness cover add-on.

If you add children’s critical illness coverage to your life insurance, you will be paid if your child is diagnosed with a catastrophic disease. This would pay all expenditures associated with their care, including any time away from work required to care for them.

If you’re thinking about getting life insurance for your child, go to your policy advisor to see what they can give. If you’re seeking new bargains, check prices to find which policies can add child life insurance at the lowest cost.

Advantages of Purchasing Life Insurance For Your Children

#1. It ensures insurability.

The most appealing aspect of a child’s life insurance policy is that you are ensuring that your child will have coverage even if he or she develops a health condition later in life. Furthermore, insurers frequently provide riders (at an additional cost) that allow you or your child to obtain more coverage in the future without having to undergo a medical exam or prove insurability.

When you get life insurance for a child, you are not simply locking in insurability if your child’s health changes. You’re also ensuring that your child is covered if he or she pursues a risky pastime, according to Steve Meldrum, an insurance specialist with Swell Private Wealth. Meldrum, for example, has a 23-year-old client who has had difficulty obtaining life insurance because he is a scuba diver—a hobby that insurers regard as a danger to insure.

#2. It enables you to lock in a low-interest rate.

There will never be a better time to buy life insurance than when your children are still babies. Rates will rise with each passing year of life. Naturally, you or your child will have to pay premiums over a longer period of time. However, owing to the extremely low rates for children, the total amount paid over time may be lower. Using Hoang’s rate example, the $44.46 monthly premium for $100,000 of coverage at age 0 will total $20,000 less over 65 years than the $126.76 monthly premium paid by a 30-year-old over 35 years.

#3. It makes provision for funeral expenditures.

Because the chances of a child dying are low, burial fees are not a compelling incentive to buy life insurance for children. However, if this occurs, a life insurance policy will provide funds to assist in covering the cost of terminal expenses. It may also allow the family to take time off work to grieve the loss of a child.

If you only need life insurance for a child to cover funeral expenses, you can probably add a rider to your own life insurance policy to cover your child for less than the cost of a whole life insurance policy on the child.

#4. It has monetary value.

A percentage of the premiums paid for a whole life insurance policy is allocated to the accumulation of cash value. When you buy a life insurance policy for your children, a larger amount of the premium will go toward the cash value because the cost of insurance is lower and the cash value has more time to accumulate.

The Drawbacks of Purchasing Life Insurance for a Children

#1. It has a very low rate of return.

Whole life insurance products accumulate financial worth, albeit at a low rate of return. Life insurance for a child should not be used in place of a 529 college savings plan.

When you buy insurance for a newborn, it normally takes 15 years for the cash value to equal the premiums paid—that is, to break even. However, if you invest in a 529 college savings plan and get a 7% return (the typical stock market return), your investment would double in 10 years. Investing in a 529 plan yields substantially higher returns than investing in a life insurance policy.

#2. It is a lengthy commitment.

When you buy a whole life insurance policy, you should anticipate paying payments for several decades.

If the insurance has adequate cash value, you may be able to utilize it to cover premium payments for a while. However, your child will have less cash value if he or she requires it later in life.

#3. Coverage limits are typically minimal.

Several insurers cap the amount of coverage for children’s life insurance policies at $50,000 or $75,000. That will not suffice once your child is an adult with a family to support. To get adequate coverage, they will most likely need to buy life insurance as an adult.

#4. It’s a monetary trade-off.

When you buy life insurance for your children, you are foregoing funds that could be utilized to support your children’s well-being, according to Meldrum. Because your child is unlikely to die at a young age, your money may be better spent elsewhere.

When Can I Buy Life Insurance for My Children?

Children are normally eligible for coverage when they are 14 or 15 days old. Once that barrier is reached, you can buy insurance for your kid or grandchild at any time until they reach the age of majority. The cutoff age differs between insurers. For example, the Gerber Life Insurance Grow-Up Plan has an age limit of 14, whereas Mutual of Omaha has an age limit of 17 for purchasing a children’s whole life insurance. If you add a kid life rider to your own policy, the age limit may be raised to 25, depending on the business.

How Do I Buy a Life Insurance Policy for My Children?

Parents, grandparents, and legal guardians can buy life insurance for their children directly from insurers, either online or over the phone, or through a licensed agent. Employers who provide group life insurance as a perk to their employees may also provide optional extra life insurance, such as policy riders to cover wives or children. However, not all insurance firms provide kid life insurance policies and riders. Check with your insurer or agent if you want to get coverage.

Best Children Life Insurance Providers in 2022

  • Protective
  • Nationwide
  • The Mutual of Omaha
  • Penn Mutual Insurance Company
  • Life Insurance from State Farm

#1. Protective – Best Overall

Pros

  • Children’s term rider convertible
  • Paid-up benefits if the insured dies before his or her children.
  • Children’s policy alternatives are diverse.

Cons

  • J.D. Power has a low ranking.

Protective provides a diverse range of coverage alternatives for children. It features the largest term conversion limitations for children and the cheapest term policies of the companies we looked at.

You may acquire up to $25,000 in coverage for all present and potential children aged 15 days to 18 years under one rider with Protective’s children’s rider. When your children reach the age of 25, you can convert the rider to permanent insurance for up to five times the face value. If you choose permanent coverage, Protective additionally offers entire, universal, and indexed universal life plans for children.

AM Best has assigned Protective an A+ (Good) financial strength grade, indicating a superior ability to pay claims. And, although ranking 16th out of 21 firms in the J.D. Power 2021 U.S. Individual Life Insurance Study, the insurer had fewer complaints with the National Association of Insurance Commissioners (NAIC) than predicted during the last three years, given its market share.

Protective also ranks high in our rankings of the best life insurance companies, best term life insurance companies, and best life insurance companies for persons over the age of 50.

#2. Nationwide – Best In Terms of Customer Satisfaction

Pros

  • Children’s term rider convertible
  • There have been far fewer complaints than expected.
  • J.D. Power ranked them second in terms of customer satisfaction.
  • Provides whole, term, and universal life insurance for children.
  • Three living benefits are included in the policies.

Cons

  • Nationwide must be contacted for a quote.

Nationwide is well-regarded for its customer service and financial stability, and it provides a choice of options for children’s life insurance. Over the last three years, the insurer has had considerably fewer complaints than predicted, and it also ranks second out of 21 insurers in the J.D. Power 2021 U.S. Individual Life Insurance Study.

You can purchase whole or universal life insurance for your children, or you can add a children’s term rider to your existing term or a permanent policy. The rider covers eligible children from the age of 15 days until the age of 22 or the time of marriage. When your child reaches the age of 18, they can change their coverage to their own permanent policy.

Nationwide also has an A+ (Superior) financial strength rating from AM Best and most policies contain three living benefits for chronic disease, critical illness, and terminal illness. These are just a few of the reasons why it is our top choice for best life insurance companies and best whole life insurance companies.

Perhaps the only disadvantage is that the company’s term insurance isn’t as cheap as those of other providers. It is, nonetheless, worthwhile to compare pricing for children’s standalone plans with other insurers.

#3. Omaha Mutual Insurance Company – Best For Living Benefits

Pros

  • Children’s term rider convertible
  • Two appealing riders with children’s entire lives
  • A diverse range of riders is available.
  • The majority of insurance contains living benefits.

Cons

  • The maximum face amount on children’s riders is $10,000.
  • Only whole life insurance is available for children.

You can purchase solo whole-life insurance for children and then add a guaranteed insurability rider and/or a premium waiver rider to the policy. There are also no-exam life insurance options, such as the children’s whole life policy.

Mutual of Omaha provides a number of riders, some of which are unusual, such as a disability income rider and a return of premium option for term coverage. Furthermore, most policies include at least two living benefits, with Express Term and Express IUL policies including three—for a terminal, critical, and chronic conditions. This is one of the reasons it is one of the best term life insurance providers for children.

You can acquire up to $10,000 in coverage for all dependent children aged 15 days to 20 years if you purchase a dependent children’s rider. It expires when the base policy expires, the insured reaches the age of 65, or the youngest child reaches the age of 23. Mutual of Omaha, like many other reputable firms, allows you to convert the children’s rider to a permanent policy with a face amount up to five times the rider coverage amount. It is important to note that this is a relatively low face value when compared to insurers who offer up to $25,000 in coverage.

#4. Penn Mutual Insurance Company – Best For Most Policy Types

Pros

  • A convertible child’s rider is available.
  • The NAIC has received far fewer complaints than expected.
  • No-medical-exam policies with high coverage for qualified applicants
  • Some insurance is dividend-eligible.

Cons

  • There is no online quote or application.

Penn Mutual has the most permanent coverage choices for children among our top-rated companies. For your children, you can purchase universal life, variable universal life, indexed universal life, whole life, and one-year term plans. Because the one-year term policy is convertible to a permanent policy, it’s an excellent option for temporary needs or if you can’t now afford the cost of permanent coverage.

A children’s rider on your own insurance can provide up to $25,000 in coverage. (With the exception of Protective, this is the greatest sum offered by our top children’s life insurance carriers.) On the policy anniversary closest to their 23rd birthday, your children can convert to a permanent policy for up to five times the value of the rider.

Furthermore, the organization has a long history of providing dividends to qualifying policyholders, having done so since 1847. As a result, it is our choice for the top whole life insurance company for dividends. It’s also one of the best no-medical-exam life insurance providers, with the largest coverage levels we’ve observed. Some healthy applicants may be able to apply for up to $7.5 million in coverage without having to undergo a medical test.

Penn Mutual has received high accolades for its financial strength, earning an A+ (Superior) rating from AM Best, and has had much fewer complaints with the NAIC over the last three years than expected given its size. It is not possible to obtain a life insurance quote or apply for term coverage online.

#5. State Farm Life Insurance – Best For Financial Stability

Pros

  • There is a convertible term rider for children available.
  • AM Best’s highest financial strength rating
  • Customer satisfaction is at its peak.

Cons

  • Pricing for term insurance is below average.
  • There aren’t many other customizing possibilities.
  • To apply for a term contract, you must first speak with an agent.

While all of our top options have exceptional financial strength ratings, State Farm receives the maximum possible rating from AM Greatest, earning an A++ (Superior), making it the best choice for financial stability.

The State Farm children’s rider also covers you until you reach the age of 25 or until you reach the age of 65. When your child turns 18, you can buy up to five times the amount of the child’s term rider and convert it to permanent coverage.

State Farm also provides universal and whole-life coverage for children and has a high customer satisfaction rating. It was the top insurer in the J.D. Power 2021 U.S. Individual Life Insurance Study, which is why it ranked first in our analysis of the best whole life insurance companies for customer satisfaction. Furthermore, depending on its size, the corporation had much fewer complaints with the NAIC during the last three years than predicted.

Because State Farm’s term policy is more expensive than its competitors (based on our evaluation of 32 term life insurance firms), it may be better for families who desire permanent coverage for their children or permanent coverage with a children’s rider. And if you want a comprehensive set of living perks, you might be better off looking elsewhere.

What is the distinction between life insurance for children and a child insurance rider?

A child insurance rider, which is an extension of your or your partner’s life insurance policy that provides a minor death benefit if your child dies, is not the same as life insurance for children. A child rider can be less expensive, and it can frequently be turned into separate insurance for your child once they reach the age of majority.

When Life Insurance for Children Makes Sense—and When It Doesn’t

Before purchasing life insurance for a child, ensure that you have adequate coverage for yourself. Priority is given to protecting loved ones’ financial well-being. Before purchasing life insurance for a child, make sure you’ve addressed all of your other financial obligations. Putting money aside for an emergency, saving for retirement, and paying off high-interest debt should take precedence.

Although purchasing life insurance for a child is not always a good idea, it can be a good answer for certain families. High-income parents, for example, may find the ability to transfer wealth to their children via a life insurance policy intriguing. Alternatively, they may prefer the tax-advantaged increase on the cash value element of the insurance.

Working with a financial consultant can assist you in determining whether life insurance for your children is a good fit for your family and overall financial situation. Consider working with an independent insurance broker, who has access to multiple insurance providers and can assist you in finding the best policy at the greatest price.

Life Insurance For Children FAQs

Why would a parent take out a life insurance policy on their child?

Many parents buy life insurance policies for their children in order to preserve their future insurability if they develop medical conditions that preclude them from obtaining coverage in the future.

What is voluntary child life insurance?

Voluntary kid life insurance is life insurance for the employee’s children. It means that if the child dies, the insured will receive monetary compensation.

What happens to a life insurance policy if the beneficiary is a minor?

Insurance firms are not permitted to pay out life insurance proceeds directly to underage children. Any payments to your family may be delayed until a court-designated custodian is appointed to administer the funds.

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