Does it make sense to buy life insurance for my child?

Does it make sense to buy life insurance for my child?

You might have seen the commercials. A bunch of parents sit around a table, drinking coffee, when someone asks, "Has anyone actually started saving for college yet?" Only one couple has even started – they found out about the Gerber Life College Plan. It makes it easy to save for college, and it’s a life insurance plan as well. "That’s different!" one parent exclaims.

It certainly is different, but is it a good idea?

Before we can answer that question, we have to talk about what the Gerber Life College Plan and other child life insurance policies are and what they do. Child life insurance policies are a type of policy called whole life insurance. Whole life insurance features elements of both insurance products and investment products.

There’s two reasons we don’t suggest whole life insurance for adults: 1) it’s not the best life insurance product and 2) it’s not the best investment product. Those reasons are true for children as well.

If you’re considering a life insurance policy for a child, there’s a good chance you’ve thought about the possibility of your child’s death and you’re worried you can’t afford the funeral and other associated costs, such as time off work. If this is the case, consider getting a child rider on your own term life insurance policy instead of buying a child life insurance policy.

If you’re only considering child life insurance because of the college savings or investment aspect, you should look at 529 college savings plans instead. 529 college savings plans are the best way to save for your child’s education. Check out our article on 529 college savings plans to read more about them and to see how they compare to other savings products.

Overall, we think that buying a child life insurance policy is not a good idea. However, there is one situation where you may want to buy whole life insurance for your child. If your child has the potential to develop a medical condition that would make buying life insurance later in life more difficult, more expensive, or impossible, buying a life insurance product for them now, while they are healthy, will guarantee that they’re insured for life. That’s because once a life insurance policy is in force, it will stay in force as long as it’s being paid for; the life insurance company can’t take it away from your child if their medical condition changes.

Sometimes when we give out this advice, parents think that they should buy child life insurance just in case their child develops an uninsurable medical condition. We don’t suggest this. Instead, look at your family history. If there is a history of debilitating medical conditions that are both genetic and develop early in life, buying a life insurance policy for your child now makes sense. Otherwise, we think child life insurance is unnecessary.

Image: Kristina Alexanderson