Parents, grandparents, or guardians can buy child life insurance to cover a minor or young adult’s unexpected death. Some policies offer small amounts to simply cover funeral and burial costs, while others offer a savings component that can be potentially used by your child later.
Learn more about child life insurance, how it works, where to buy child life insurance and the different types of child life insurance.
Definition and Examples of Child Life Insurance
Child life insurance usually pays a death benefit to the parent or guardian if a young person dies. While child life insurance is intended to help cover death-related costs, some policies also build cash value, like a savings account.
- Alternate name: Juvenile life insurance
For example, Gerber Life Insurance’s Grow-Up Plan is a permanent children’s policy with coverage ranging from $5,000 to $50,000. It’s designed to last for your child’s entire life and builds a cash value your child can access as an adult. You pay a monthly premium per child for coverage.
Child life insurance generally falls into two categories: It may be either permanent or temporary coverage. Whole life is a form of permanent coverage, while term life expires after a certain number of years.
How Child Life Insurance Works
Children’s insurance can be purchased directly from a company, added to your own life insurance policy, or purchased through your workplace. Cost can vary widely depending on the type of policy it is (whole life or term), and where you purchase it (through work, or on your own). Typically, the policy owner must be a parent, grandparent, or legal guardian until the child becomes an adult.
Types of Child Life Insurance
A term policy may last up to when the child becomes an adult or, if purchased through an employer, until you leave your job. A whole life policy provides lifetime coverage as long as you pay monthly premiums.
Term Child Insurance
Term life insurance lasts for a specific period of time, such as a 10- or 20-year term. The cost to cover the child remains the same throughout the term. Term insurance for children is often available via a child insurance rider that you can add to your own term or whole life policy. This policy may be one you purchased on your own or one you have through work.
If purchased as a rider, coverage may last until your child turns 21 or 25, depending on the insurance company, and you may be able to cover multiple children with one premium.
After the term expires, coverage will end. If your child is still a minor, you could apply for new coverage for them. If they’re an adult, they can apply for their own policy.
You may be able to convert your child’s term coverage to whole life coverage before the policy expires—this is referred to as convertible term. If you purchase a whole life policy for your child, they are eligible to become the policyholder at adulthood and pay premiums.
Whole Life Child Insurance
Whole life child insurance is a common insurance product that offers coverage throughout the child’s lifetime. Whole life child insurance incorporates a tax-deferred cash value that will build as your child grows. At adulthood, policy ownership can transfer to the child (but doesn’t have to). Your child will typically have several options moving forward:
- Retain the policy and continue paying the premium locked in at childhood.
- Surrender the policy for the accumulated cash value.
- Purchase any additional life insurance coverage they need.
If your child surrenders the policy for cash, they’ll likely have to pay tax on any amount above the sum total of premiums paid.
Eligibility for Child Life Insurance
Insurers often won’t require a medical or physical exam for child life insurance. However, the application process may include risk-related health and safety questions about your child, such as:
- HIV status
- Chronic conditions including heart, lung, or kidney disease, cancer, and diabetes
- Confinement at home due to illness or injuries
- For teens, driving violations, a suspended license, or driving while intoxicated.
- Hospital, neonatal ICU, or psychiatric hospital admission
- Chromosomal disorders
- Depression, drug abuse, or brain surgery or injury
- Terminal illness diagnosis
Based on your answers to these questions, the insurer will decide whether the child is eligible for coverage. You may also need to sign a release so that the insurer can review your child’s healthcare records.
Insurers may have additional rules, including:
- Sibling coverage amounts must be similar
- One or more parents or guardians must have equal or greater amounts of coverage
- Policy owners must reside in the U.S. as a U.S. citizen or qualifying visa type
- A minimum household income or proof of net worth requirements
A few states, such as Washington and New York, have explicit rules around child life insurance. For example, in Washington, children at least 15 years old must sign the application if someone wants to buy them a life insurance policy.
Some child life policies may offer low teaser rates for initial coverage—read the fine print specific to your state to know whether your rate will increase. Once the teaser rate expires, the child’s current age usually determines a monthly rate that stays the same for the policy’s duration.
Here is a sampling of rates for $10,000 in coverage. Note that rates can vary widely depending on what type of coverage you get and how long it’s designed to last for:
- Whole life plan: Around $7-$12 per month for one child for a permanent life insurance plan with Gerber.
- A child term rider on a term policy: About $5 per month through Banner for all children in the home
- Child coverage through work: Could be as low as 32 cents per month for child term coverage that lasts as long as you maintain the benefit, generally around $1 or less.
Other child insurance policy maximums from more traditional life insurance companies can go into the millions, depending on the insurer. However, these policies often require parents to have equal or greater life insurance amounts.
In states such as Washington and New York, amounts are limited by state law. For example, in New York, kids between age 4 and 14 ½ cannot be insured for more than $50,000 or 25% to 50% of the policy owner’s insurance.
Variation in state law can change child life insurance benefits. In some states, the insurer will not pay death benefits if the death involves suicide or occurs within a specific timeframe, such as two years. Typically, the premium is refunded, but no payout can be received.
Do You Need Child Life Insurance?
The answer to this question depends on why you’re purchasing a policy. If you’re looking for cheap term coverage to pay for burial or cremation expenses, a term rider added on to your existing policy is usually an affordable way to accomplish that.
If the tax-deferred cash value element appeals to you, ask your insurance company for an illustration that projects cash value performance over a number of years. This way you can compare it to other investments you might make on your child’s behalf, such as a 529 savings account.
But be aware that this isn’t built to be an investment—it’s insurance. And has associated insurance costs and administrative expenses. It’s quite possible that those costs could negate the value you hope to get from the policy. As with any permanent life insurance policy, ask about policy expenses and be especially aware of steep surrender charges you may incur if you cancel the policy before a certain number of years.
- Child life insurance guarantees a death benefit payout upon a child’s death for a specified period of time, as long as you pay premiums.
- Child life insurance policies are either term or whole life. Term policies may last until the child attains adulthood, while whole life policies can provide lifelong protection.
- Child life insurance may not be necessary; read the fine print and compare to other methods of saving for a child’s benefit or unexpected expenses.
- Costs can vary widely depending on the type of child life insurance you purchase—term coverage is the most affordable.