Should you buy life insurance for children?

Life insurance primarily helps your dependents cover any financial loss that will occur when you die. For most children, no one depends on them financially and the only financial loss that will occur if they die will be burial expenses. In the majority of cases, getting life insurance coverage for children isn’t recommended.

While it’s true that life insurance rates go up as you age, if your child is healthy, they will still be eligible for insurance coverage at excellent rates in their early adulthood. Further, the only coverage option available for most minor children, whole life insurance — a type of permanent coverage — is costly to maintain over your child’s entire life, because it's many times more expensive than other coverage options, like term life insurance.

For most people, getting term life insurance as a young adult rather than whole life insurance a child will provide the coverage you need at the most affordable rates. But there are some benefits to buying coverage for your children, especially if your family has unique financial needs.

How does life insurance for children work?

Life insurance for children works much like it does for adults: The policyholder pays premiums and the policy pays out to a beneficiary (usually the parent or guardian) if the insured passes away while the policy is active.

Unlike coverage for adults, however, options for children are limited. Adults can usually choose between term life — the most popular and affordable coverage option for most people — and universal or whole life insurance policies. Parents who want to buy a coverage for their children only have the option of whole policies. (Term life insurance is not an option for children because its primary purpose is to replace income after the policyholder dies, and kids don’t have any income to replace.)

Whole life insurance is a type of permanent coverage that usually has a cash value savings component in addition to the death benefit. While whole life insurance never expires (which means your kid would be covered for their entire life as long as they keep paying the premiums), whole life is usually five to 15 times more expensive than a comparable amount of term life insurance coverage.

Most child policies, like Gerber Life Insurance, are marketed as financial tools to invest in educational expenses, lock in affordable premiums, protect your child’s insurability, and cover funeral expenses if your child passes away. 

However, these policies also have downsides:

• They don’t offer competitive rates compared to term life insurance.

• They aren’t necessary to guarantee insurability for your child.

• They come with high administrative fees and low rates of return.

• They may not accumulate enough cash value by the time you need the funds.

Another way to protect your child financially is to get life insurance for yourself. Since minors can’t accept life insurance payouts, you can provide better protection for your child by having your own policy that pays out to a trust or whoever your child’s guardian would be if you pass away.

Child life insurance pros and cons

Who needs life insurance for their children?

You don’t need to protect your child’s insurability unless you have a family history of serious medical conditions that develop early in life or a child with disabilities. As for locking in premiums, most adults have no issues securing affordable coverage in their 20s and 30s.

If you need to insure your child’s life, it’s simpler and cheaper to add a child rider to your term policy — riders are add-ons that can provide supplemental coverage to a life insurance policy. You may also choose this option to cover funeral costs if the unthinkable happens.

Child life insurance vs. child riders

People often confuse child life insurance with child riders, but there’s a big difference between the two:

• Child life insurance is a standalone policy that insures a child’s life. The insurer pays out a death benefit when the child passes away.

• Child riders are optional add-ons to your own policy that pay out a small death benefit if one of your children dies. Coverage is tied to the parent’s or guardian’s policy. 

Benefits of a child rider vs. child life insurance

If all you need is peace of mind should the unthinkable happen, a child rider may be a better option than a standalone child life insurance policy.

• Straightforward coverage. A child rider provides coverage for your child without the complex investing component that child policies have.

• Conversion flexibility. If your child needs lifelong coverage, a child rider can be converted to a permanent policy in the future . 

• Affordability. A child rider is more affordable than a full child life insurance policy. It usually costs about $5 per year for every $1,000 worth of coverage. So, you might pay $50 more per year for a $10,000 child rider.

Is children’s life insurance a good investment?

Short answer: no. Permanent policies have a cash value component that grows over time. The cash value is why insurance companies pitch life insurance for kids as a savings vehicle for your child’s future. But in general, these types of policies have higher fees and less growth than you’d get from a standalone investment account.

Proponents of child life insurance argue that since rates increase as you age, buying a policy when your child is young can secure coverage for them when they’re older.

While it’s true that life insurance rates increase about 4.5%-9% each year you age, it’s unlikely that a child will be unable to get an affordable insurance policy in place as a young adult. The exceptions are if your child has a lifelong disability or chronic illness that would make getting affordable term life insurance difficult when they grow up. 

Child life insurance supporters also argue that a whole policy for a child is a great investment. In most cases, however, this is rarely the case.

While the cash value from a whole policy earns interest at a rate set by your provider, often with a guaranteed minimum, for the average person, funding a whole life insurance policy is prohibitively expensive. This is because whole costs about five to 15 times more than term. Maintaining those premiums over the course of your child’s life may become unaffordable over time.

“A lot of life insurance agents sell child policies as a great ‘investment’ or perfect place to save money for education costs in the future. However, these policies should never be used as a primary source of college savings or funding,” says Patrick Hanzel, certified financial planner and Advanced Planning Team Lead at Policygenius. “The policies take many years to accumulate value, and oftentimes won’t even have broken even (when cash value available for loan is greater than total premiums paid) by the time the funds are needed.”

Child life insurance policies are often sold as a great ‘investment’, but they shouldn't be used as a primary source of college savings.

- Patrick Hanzel, certified financial planner and advanced planning team lead

The best life insurance products to insure children

A child rider is the best way to protect your family against the unexpected death of a child. Adding a child rider to your existing term life insurance policy is a low-cost way to ensure financial help in case of the unimaginable. 

Child riders by life insurance company

Here’s how Policygenius’ partner insurance companies handle child riders on term policies:

Company	Eligible ages	Coverage amount	Annual cost per $1,000	Asks medical questions?	Add to active policy?
Banner Life	15 days-18 years	$5,000 or $10,000	$5.50	No	Yes
Corebridge Financial	15 days-18 years	$500-25,000	$5.00	Yes	Yes
Lincoln Financial	15 days-18 years	$1,000-15,000	$5.00	Yes	Yes
Mutual of Omaha	15 days-20 years	$1,000-10,000	$7.20	No	No
Pacific Life	15 days-18 years	$1,000-10,000	$5.50	Yes	Yes
Protective	15 days-18 years	$1,000-25,000	$6.00	Yes	Yes
Prudential	15 days-18 years	$10,000-100,000	$5.15	Yes	No
Symetra	15 day-17 years	$1,000- $10,000	$4.20	No	No
Transamerica	15 days-18 years	$1,000-$99,000	$6.00	Yes	Yes

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Methodology: Information based on policies offered by Policygenius as of 02/22/2023.

Best whole life insurance for children

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Why we chose it

MassMutual’s whole life insurance plan provides a lifetime coverage option that builds cash value with the potential to earn dividends.

Pros and cons

Pros

• Strong financial stability ratings

• Higher potential for dividends for whole life policyholders than many competitors

• Good customer experience ratings

Cons

• High term life premiums

• Term life not available through Policygenius

Read our full MassMutual review

MassMutual pays higher dividends to its cash value policyholders than many competitors. It has high customer experience ratings compared to other carriers and consistently receives high third-party financial stability ratings, which is especially important when purchasing a lifelong policy.

Alternatives to life insurance for children

A more suitable option for most people is setting up a savings plan to cover your children's future expenses. Traditional savings options, like 529 education plans, stocks, bonds, or UTMA accounts, can be funded with the money you would have contributed toward life insurance.  

• 529 savings plan: These plans are tax-advantaged accounts sponsored by the government. There are two types of 529 accounts: prepaid tuition plans and education savings plans. Both are exclusively for higher education expenses and qualified withdrawals are tax-free.

• Custodial account: Parents can save and invest in a custodial account held in the name of their child, such as UTMA (Uniform Transfers to Minors Act) or UGMA (Universal Gifts to Minors Act) to build savings for their child. Custodial accounts are handled by the parent or guardian and transferred to the child when they turn 18 or 21.

• IRA: If your child earns money, you can manage an IRA savings account for them and match their earnings to jump-start retirement savings.

If you’re looking to save for your child’s future, a life insurance plan isn’t the best way to invest. To protect your children financially, it’s more important to have your own policy, rather than life insurance for your children, so that the proceeds can provide for them if you pass away unexpectedly. 

You can also consider adding a child rider to your own term policy and saving for their future through alternative savings plans and accounts. 

Frequently asked questions

What is the best life insurance for a child?

The best life insurance for a child is a child rider added onto your own life insurance policy. Children do not provide income and therefore do not need their own policy. Adding a rider to your own term policy can provide financial protection against the loss of your child.

Should you purchase life insurance for your child?

You don’t need to purchase life insurance for your children unless you have sufficient disposable income or if your child has specific needs and may not qualify for coverage as an adult.

How much does child life insurance cost?

A $50,000 policy for a juvenile costs $30 to $50 per month, while a child rider for term life insurance might cost $5 or less per month for the same coverage amount. As coverage amount and age increase, so do premiums.

Is child life insurance a good investment?

Child life insurance is not a good investment. The cash value of the policies grows at a lower rate and comes with higher administrative fees than a traditional investment account. Instead, you can focus on a 529 plan to save for their future.