If you don’t think you could afford a funeral for a child or taking time off work to grieve, some sort of life insurance for your children is a good idea. You have two options: a child whole life insurance policy or a child rider on your term life insurance policy. We suggest the latter (except in one uncommon circumstance).
Most term life insurance policies have the option to add on a child rider. That means that, in addition to covering your life, your life insurance policy will provide a death benefit in the case that one of your children passes away.
The nuts and bolts of child riders are actually quite simple. You request a certain amount from the insurance company – usually in "units" of $1,000 – and the cost per unit is added on to your yearly premium. The cost per unit depends on the insurance company, but most fall with the $5/unit and $7/unit range.
Here’s an example. Let’s say you’re looking to cover the cost of a funeral, which can range between $7,000 and $10,000. You ask your insurance company for $10,000 of coverage on the child rider, which they price out at $5 per $1,000 of coverage. This puts the annual cost of your child rider at $50. If you pay monthly, this adds approximately $4.17 to your premium every month. That's an additional cost to consider when you get your term life insurance quote and get ready to apply.
Typically, a single child rider will cover all of the children in your household. Each insurance company will decide how long a child is covered, but most typically cover children starting at 15 days old and ending sometime between age 18 and 22, with most ending at 18.
If you’re buying a term life insurance policy today, you should discuss child riders with your broker. Brokers can help you compare the terms of child riders from across different insurance companies. If you’ve already purchased a life insurance policy and you’re interested in adding a child rider, contact your life insurance company today.
Image: Into Somerset