Should you buy a life insurance policy for your child? We’ll go over the pros and cons of child life insurance and the types of coverage available to help you make a decision. But the short answer is, in most cases, no.
There are two types of life insurance for children.
A permanent policy (whole life insurance) covers your child for their entire life. Because your child is the one covered, you and/or your spouse would be the beneficiary(ies).
Permanent policies also build cash value over time. A small portion of every payment you make gets put into the cash value account. It earns interest at the rate specified when you buy the policy.
As the years go by, it can add up to a little nest egg for your child. Later in life, the policy’s beneficiaries can be changed to your child’s spouse and/or kids.
Some insurers also offer term policies for a child, designed to cover them until they grow up and are on their own. Term policies will be much more affordable than whole life policies, which make them a good option if you’re on a budget. If your child still wants coverage when the term has expired, they can apply for another term policy or a permanent policy. Prices will be low if they act quickly – the younger you are, the cheaper it is to buy life insurance!
Because of the big price difference between whole life and term life, policy type matters when we’re talking about the pros and cons of child life insurance.Get a Free Quote Now
Another price consideration we have to mention when we talk about the pros and cons of child life insurance is the difference between individual policies and child riders.
A child rider is an extension of your policy that also covers all your children (natural, step, and adopted). It pays a small death benefit if any of them pass away before you. The best part is the price. Depending on the amount of death benefit you select, this additional coverage can be as little as a few dollars a month.
The catch? Most insurers do not let you add a child rider if you already had children when you bought your policy. If you didn’t have kids when you bought your policy, most insurers will let you add the child rider later.Get a Free Quote Now
So…should you buy life insurance for your child? Based on the pros and cons of child life insurance above, only you can make that decision. However, it often doesn’t make financial sense to do so.
You need to consider individual points like: