Best Life Insurance for Kids - Your 2022 Guide
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Life insurance for kids pays out death benefits if the insured child dies during the coverage period. Child life insurance is typically purchased as a whole life policy, which offers lifelong coverage as long as premiums are maintained. Term life policies with coverage periods of 10 to 30 years with the option to convert the policy into a whole life policy when the term expires are available, as well.
Beyond death benefits, life insurance policies will guarantee future insurability, ensuring that your child will be covered regardless of any health conditions they may develop, and low rates that last the entire coverage period (for whole life policies). Whole life policies can even build cash value over time, allowing the policyholder to take out a loan against the accrued equity or cash it out completely by canceling the policy.
The best life insurance company for your child will offer competitive rates, flexible coverage options and benefits useful to your child when they grow up. Keep reading to learn how child life insurance works and which insurance companies stand above the rest.
Best Life Insurance for Kids
When shopping for life insurance, it's important to first, determine if you want a whole life or term life policy. We looked at different types of life insurance policies, their coverage amounts and rates to highlight the industry standouts.
Thrivent Whole Life Insurance
State Farm Children's Term Rider
Gerber Life Grow-Up Plan
15 days-17 years
14 days-14 years
Term life rider
Best for high coverage amounts
Best for rider to existing life insurance policy
Best for whole life policy
Thrivent: Best for High Coverage Amount
Thrivent offers child whole life insurance policies with coverage amounts up to $100,000. This level of coverage may be available from other insurers but only under certain circumstances, like when converting a term life policy to a whole life policy or when the child reaches a certain age. The option to purchase such a high limit may be useful if a child is predisposed to or has developed a high-mortality condition.
As a whole life policy, there is a cash value component that builds equity, so long as you maintain your premiums. The cash value can be tapped into as a loan to be used for college, a wedding or some other life event. The policy can also be canceled to cash out the full equity accrued. Term life policies do not build cash value like whole life policies.
Monthly premiums start at $12 per month for a whole life policy of $25,000 coverage for a one-year-old baby boy. Thrivent doesn't offer a term life product for children.
State Farm Children's Term Rider: Best for Rider to Existing Life Insurance Policy
If you have an existing life insurance policy with State Farm, you can extend coverage to all of your children with a single insurance rider. State Farm's child term rider offers up to $20,000 of life insurance coverage for each child in your family, including any babies on the way — once a newborn turns 15 days old, they're automatically covered under the rider.
When the child turns 25, the rider may be converted to a whole life policy for up to five times the amount of coverage. Converting from a term life policy to a whole life policy can be useful if your child developed a concerning medical condition and they need lifelong coverage. Your child's insurability will be guaranteed — if you tried buying a whole life policy without being previously insured, then having a certain medical condition can make it more difficult to qualify.
Premiums, however, may increase after converting from a term life to a whole life policy. Your child's insurability will be guaranteed but the premiums will likely reflect the higher age at the time of conversion. Fortunately, the larger premiums can also mean bigger savings because a portion of the premiums are deposited into a savings account to build cash value over time.
Term life policies are typically cheaper than whole life policies. State Farm quoted a children's term rider for $10,000 of coverage at $50 per year (only $4.17 per month).
Gerber Life Grow-Up Plan: Best for Whole life Policy
The Gerber Life Grow-Up Plan is a whole life policy with coverages of $5,000 to $50,000 for children ages 14 days old to 14 years old. The monthly premium on a policy for $5,000 of coverage for a child less than one-year-old can start as low as $3.70 per month.
When the insured child turns 18, the coverage amount automatically doubles at no additional cost. For example, a policy with $50,000 of coverage doubles to $100,000 when the insured child turns 18. At age 21, the insured child becomes the policy owner and can purchase up to ten times the original coverage amount — no medical exam required. The whole life policy builds cash value over time, allowing the policyholder to take out a loan against the accumulated equity or cash it out by canceling the policy.
To buy a Gerber Life Grow-Up Plan for your child, they must be 14 days to 14 years old, which is quite low compared to other insurers that set the age maximum at 17 years old (although, there is a separate Gerber life insurance policy for teenagers ages 16 to 17). The Gerber Life Grow-Up Plan does not have a term life option.
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What Is Child Life Insurance and How Does It Work?
Life insurance for children is a contract between an insurance company and a policy owner that pays a sum of money to the named beneficiaries on the policy when the insured child dies. Child life insurance is typically sold as a whole life policy but some insurers offer a term life option:
- Whole life policy: Coverage will last for the insured child's entire lifetime if premium payments are maintained. Whole life policies also have a cash value component that grows over time. Depending on your insurer, you can take out a loan against accrued equity or cash it out by canceling your policy.
- Term life policy: The coverage period on a term life policy will typically last 10 to 30 years. When the term expires, the policyholder can either surrender coverage or convert the term life policy into a whole life policy.
For most life insurance policies, the insured and policyholder are the same. For child life insurance policies, the child is the insured and the policyholder is typically their parent, adopted parent, grandparent or legal guardian. The policyholder is often the beneficiary, as well, receiving death benefits if the insured child dies.
Generally, children have lower rates of mortality so death benefit payouts are unlikely in the insured child's early years. While child life insurance offers a financial safety net in the event of the insured child's death, there are other advantages to taking out a life insurance policy for a child.
First, buying life insurance for a child guarantees future insurability. If the insured child grows up and develops a serious medical condition, they are still covered under the life insurance policy and will still be able to convert to a whole life policy. If your child was not previously insured, they may struggle finding coverage when they're older and have a disqualifying health condition.
Second, buying life insurance while the insured is young can lock in a lower rate if you buy a whole life policy. If you're buying whole life insurance when 50 years or older, you may see monthly rates at $100 and up. If you buy a life insurance child policy at $13 per month, then that premium stays at $13 when the insured is five years old or 70 years old.
Third, buying life insurance for a child can be a way of saving for college tuition or other major life event, like a wedding or a down payment on their first house. Whole life policies build cash value over time because a portion of your premiums are deposited into a savings account. Your child can take a loan against the accrued cash value to finance major life expenses. Your insurer may allow for the total equity to be cashed out by canceling the policy, as well.
Filing a Life Insurance Claim
If the insured child dies, the beneficiaries can file a claim against the life insurance policy. Before benefits are paid out, the life insurance company will typically require a certified copy of the death certificate. The benefits can be used to pay for funeral expenses and to replace income if the policyholder needs to take time off work and grieve.
Insurance policies typically carry a suicide clause that allows the insurer to deny death benefits if the insured commited suicide usually within two years of activating a policy.
Types of Life Insurance Policies for Kids
There are two primary types of life insurance: whole life and term life. Both types of policies pay benefits when the insured dies but have different terms and functions.
Builds cash value over time
Does not build cash value over time
Typically higher rates than term life policy
Typically lower rates than whole life policy
Whole Life Insurance
Life insurance for children is typically sold as whole life policies. A whole life insurance policy offers lifelong coverage (so long as you continue paying premiums).
Whole life policies build cash value over time because a portion of your premiums is deposited into a savings account. You can borrow against the policy's cash value in the form of a loan or cash it out completely by canceling the policy. Whole life insurance policies tend to be more costly than term life.
Term Life Insurance
A term life insurance policy pays out death benefits if the insured child dies within a fixed period — typically 10 to 30 years. Coverage stops once the terms expire but the insured may have the option to convert the term policy into a whole life policy depending on the insurer.
Policyholders will not build cash value with a term life policy but would with a whole life insurance policy. Term life policies tend to be cheaper for this reason and because the coverage is only for a fixed amount of time.
How Much Does it Cost To Insure Children?
The cost of purchasing a life insurance policy for a child will consider multiple factors, including age, medical conditions, coverage amounts and choosing between a term life or whole life policy.
Here are some example rates from popular life insurance carriers:
- Aflac: $13 per month for a term life policy
- Thrivent: Starting at $12 per month for a whole life policy
- State Farm: $50 per year for a term life rider
- Gerber: Starting at $3.70 per month for a whole life policy
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Do I Need To Buy Life Insurance for My Child?
A life insurance policy isn't necessary but can be a welcome gift when your child becomes older and takes ownership of the policy. If you purchased a whole life policy, they can now access the cash value the policy has built up over time.
For term life policies, your child may already have their own family and still be covered if the term was long enough — a 30-year term, for instance. If your child dies within that coverage period, then the family could use the death benefits issued. If your child's family later became financially dependent on your child, then the death benefits could help cover bills and other daily living expenses.
A life insurance policy purchased while your child is young will also guarantee future insurability regardless of whatever health conditions they might develop. Even if your child develops a lifelong medical condition during the coverage period, they will be covered for life (if you have a whole life policy) and at a lower rate.
Pros and Cons of Life Insurance for Kids
Guaranteed coverage even with a health condition
Low rate of return
Lock in a low rate while they're young
Long-term recurring expense
Build cash value with a whole life policy
Financial support during a trying time
- Guaranteed coverage even with a health condition: Purchasing a life insurance policy for a child can guarantee future insurability when they become an adult. A whole life insurance policy, for example, would cover the insured from infancy to old age even if they were to develop a debilitating health condition in their 20s (so long as premium payments are maintained).
- Lock in a low rate: The older you become, the more life insurance will cost. Buying life insurance while your child is young can lock in rates that will not increase as they become older — even if they've developed problematic health conditions.
- Build cash value with a whole life policy: As you pay premiums towards your child's life insurance policy, you're also building cash value. Depending on your insurer, you can take a loan against the accrued cash value to help fund your child's college tuition, pay for a wedding or even put a down payment on a first home.
- Receive financial support during a trying time: The death of a child is never easy and the financial support a life insurance policy offers can offer some relief during a time of mourning.
- Financial tradeoff: Children tend to have lower mortality rates than adults, reducing the likelihood of benefits being paid out. The money spent on life insurance premiums may be better spent on a savings or investments vehicle, like a 529 Plan, a college saving plan, that may offer high rates of return.
- Long-term recurring expense: Term policies may last a few decades but whole life policies require that you maintain premiums throughout your entire life. This will be something you need to budget for to maintain your coverage.
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Looking for an Insurance Policy for Your Children?
Losing a child is never easy, but a life insurance policy can lighten a financial burden while you're mourning. Beyond paying death benefits, buying life insurance for your child can lock in lower rates, guarantee future insurability and build cash value over time if you have a whole life insurance policy.
SmarFinancial's online tools may help match you with a life insurance policy, either for you or your child, based on your needs. Just enter your zip code below and answer a few questions to receive free quotes.