Can a minor purchase life insurance?

We all want our kids to live long, healthy lives, which is why child life insurance may not feel like a top priority. It’s worth considering, though, as it can lock in low rates and act as an investment vehicle for your children.

What is child life insurance?

Child life insurance covers the life of a minor and is typically purchased by a parent, guardian or grandparent.

In general, these policies are whole life products — a type of permanent life insurance. This means coverage lasts for the child’s entire life, as long as the premiums are paid. Coverage amounts tend to be low, often under $50,000, and premiums are locked in, meaning they won’t go up. The average annual premium for a $25,000 policy on a newborn is $150, according to Quotacy, a life insurance brokerage.

One of the benefits of whole life insurance is that it builds cash value — the policy’s investment component. A portion of the premium is paid into the account, which grows over time.

At certain ages, such as 21, the child can take ownership of the policy and continue coverage, buy more or cancel the policy altogether.

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The pros and cons of life insurance for kids

When deciding if child life insurance is right for you, consider these three popular features.

1. Guarantees future insurability

Child life insurance policies typically include or offer a guaranteed purchase option. This means the child can buy additional coverage without completing a life insurance medical exam.

The additional coverage available varies among policies, and the ability to buy more may be restricted to certain ages or life events, like marriage.

Pros: This feature can be useful if the child develops a chronic health condition, such as diabetes, or chooses a risky career, like becoming a firefighter. People with health problems or hazardous jobs typically pay much more than the average cost of life insurance.

2. Acts as an investment vehicle for your child

You can withdraw money from the cash value account or borrow against it. When the child reaches adulthood, they can surrender the policy and receive the funds in full.

Pros: The money can cover costs like school fees or a down payment on your child’s first home. It also grows tax-deferred, meaning you don’t pay taxes on the gains until you withdraw the cash.

3. Covers costs if the worst were to happen

Losing a child is extremely painful, and you may incur unexpected costs. Child life insurance policies pay out a lump sum in the event of a death, as long as the premiums are paid.

Pros: The payout can be used for expenses like burial costs or grief counseling. It can also help cover the costs of running a business if you’re the owner and need to take time off.

Cons: It’s relatively uncommon for a child to die in the U.S. Therefore, the risk of going without coverage may not outweigh the cost of the policy.

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Assess your budget and look at your own life insurance needs before buying a policy for your kids. In general, your own life insurance is more important than your child’s because it can help cover your family’s living costs or other expenses if you were to die.

You may want to consider adding a child term life insurance rider to your own policy instead of purchasing separate coverage for your children. In some cases, you can convert child riders to permanent coverage when the term is complete. Not all insurers offer these riders, and coverage amounts may be limited.

Alternatively, if you have group life insurance through your work, you may have the option to buy supplemental life insurance for a child or spouse. However, group life plans are typically tied to your employment, which means if you leave your job, you may lose your coverage.

Child life insurance pays a death benefit to the parent or guardian if a young person dies, which can help pay for costs associated with a child’s death. Most people buy it for this purpose or to lock in a low rate on a policy that, in some cases, can offer coverage for a lifetime.

Key Takeaways

• Child life insurance provides a cash payout upon a child’s death, as long as you have paid the premiums on time.
• Types of child life insurance include term and permanent insurance, and you may be able to convert a child’s policy to an adult policy.
• Child life insurance may not be necessary; read the fine print and compare with other methods of saving for a child’s benefit or unexpected expenses.
• Costs can vary widely depending on the type of child life insurance you purchase; term coverage purchased through an employer is often the most affordable.

How Child Life Insurance Works

Parents, grandparents, or guardians can buy child life insurance to cover a minor or young adult’s unexpected death. Some child, or juvenile, insurance policies offer the lower coverage amounts associated with a funeral or burial insurance policy (typically $25,000 max), while others provide more complicated permanent policies that build cash value or provide more coverage.

You may also be able to buy a children’s term rider with your own policy that can provide a small amount of coverage to all your children. Often, the rider can be converted to a permanent policy when the child becomes an adult.

Child life insurance is usually available for children as young as 14 days old and can extend into a child’s mid-20s.

As an example, a parent might add a child to their family policy under a children’s term rider. One rider could cover all the children in the family, providing $10,000 to $20,000 of coverage per child. At age 25, the child’s coverage could convert to an adult policy without the need for a medical exam.

Note

Child insurance is typically intended for unmarried adopted or biological children or grandchildren who aren’t financially independent.

Costs can vary widely, depending on the type of policy (whole life or term) and whether you purchase the insurance through your employer or on your own.

Eligibility

Insurers often won’t require a medical or physical exam for child life insurance. However, the application process may include risk-related health and safety questions. The insurer decides whether to offer coverage based on your answers to these questions.

Insurers may have additional rules, including:

• Sibling coverage amounts must be similar.
• One or more parents or guardians must have equal or greater amounts of coverage.
• Policy owners must reside in the U.S. as a U.S. citizen or with a qualifying visa.

Note

Additional parental situations could trigger a closer look from the underwriting department—such as a recent bankruptcy, high-risk hobbies, or a felony conviction.

Coverage Amounts

Coverage amounts start at around $5,000 but can rise to $25,000 and much higher. Policy maximums from traditional life insurance companies can go into the millions, depending on the insurer. However, these policies often require parents to have equal or greater life insurance amounts.

In states such as Washington and New York, maximum amounts are limited by state law. For example, in New York, kids between ages 4 ½ and 14 ½ cannot be insured for more than $25,000, or 50% of the policy owner’s insurance.

Variations in state law can change child life insurance benefits. In some states, the insurer is allowed to deny a death benefit if the death involves suicide or occurs within a specific time frame, such as two years after the start of the policy. The premium may be refunded, but no payout will be received.

Types of Child Life Insurance

Child life insurance may go by different names depending on the insurer, but the most common types are term and whole life (although universal, indexed universal, and variable universal policies are also available for children).

Term Child Insurance

Term life insurance lasts for a specific period of time, often until a specific age is reached. The cost to cover the child remains the same throughout the term.

Term insurance for children is often available via a child insurance rider that you can add to your life insurance policy as a parent or grandparent. If purchased as a rider or an addition to your coverage, the coverage typically lasts until your child turns 21 or 25, depending on the insurance company, and you may be able to cover multiple children with one premium.

After the term expires, coverage may end. If your child is still a minor, you could apply for new coverage for them. If they’re an adult, they can apply for their own policy. You may also be able to convert your child’s term coverage to permanent insurance, such as whole life or universal coverage.

Whole Life Child Insurance

Whole life child insurance is a type of permanent insurance that can provide coverage throughout the child’s lifetime, as long as premiums are paid. It incorporates a cash value account that will build as your child grows and can be either borrowed against (with interest) or cashed out when the policy is canceled.

While whole life is substantially more expensive than term life coverage, premiums for either type are much lower for a child when they are young than for an adult. The younger the insured person is, the lower the premium.

One benefit of children’s whole life is that you’re locking in a low rate and they’ll have insurance for life. As long as the premiums are paid, the policy won’t be dropped as the child ages, no matter what health issues they may develop.

Depending on the policy, your child may also be able to purchase additional amounts in the future and earn dividends to put toward additional coverage.

Note

If your child surrenders the policy for cash, they’ll likely have to pay tax on any amount above the total of premiums paid. Taking loans and partial amounts may also lead to fees, charges, and a reduced death benefit.

How To Get Child Life Insurance

Children’s insurance can be purchased directly from an agent or insurance company, added to your own life insurance policy, or purchased through your workplace. Typically, the policy owner must be a parent, grandparent, or legal guardian until the child becomes an adult.

To buy child life insurance, you’ll need to apply for it. You may also need to sign a release so the insurer can review your child’s health care records. The insurer may have exclusions for preexisting conditions such as hospital, neonatal ICU, or psychiatric hospital admission; or chronic conditions including heart, lung, or kidney disease; cancer; and diabetes. For teens, insurers may ask about driving violations, a suspended license, or history of driving while intoxicated.

A few states, such as Washington and New York, have explicit rules regarding child life insurance. For example, in Washington, children at least 15 years old must sign the application if someone wants to buy them a life insurance policy.

Some child life policies offer low teaser rates for initial coverage. Read the fine print specific to your state to know whether your rate will increase. Once the teaser rate expires, the child’s current age usually determines a monthly rate that stays the same for the policy’s duration.

Here’s a comparison for $10,000 in coverage:

InsurerTypeCost Number of ChildrenGerberWhole life planAbout $7-$12 per month1BannerChild term rider on a term policyAbout $4.50 per monthAll children in the homeEmployer-provided plansChild term policy32 cents to $1.20 per month1

Do I Need Child Life Insurance?

The answer to this question depends on why you’re purchasing a policy. If you’re looking for cheap insurance coverage to pay for burial or cremation expenses, a term rider added to your existing policy or through your employer is usually an affordable way to accomplish that.

If the tax-deferred cash-value element of whole life insurance appeals to you, shop around and ask the insurance company for an illustration that projects cash-value performance over many years. This way, you can compare it with other investments you might make on your child’s behalf, such as a 529 savings account.

But be aware that this isn’t designed to be an investment—it’s insurance. And such policies or riders have associated insurance costs and administrative expenses. It’s entirely possible that those costs could negate the value you hope to get from the policy. As with any permanent life insurance policy, ask about policy expenses and be especially aware of steep surrender charges you may incur if you cancel the policy before a certain number of years.

Frequently Asked Questions (FAQs)

Why buy life insurance for a child?

Getting life insurance for your child can be beneficial if you want to make sure there's a safety net for your family in case your child passes away. Having such a policy also may lead to potentially lower life insurance rates when they become adults. Discuss with a financial advisor the implications of purchasing life insurance while your child’s a minor.

What's the difference between child life insurance and a child insurance rider?

Life insurance for children is not the same as a child insurance rider, which is an extension of your or your partner's life insurance policy that allows for a small death benefit if your child dies. A child rider can be more affordable, and it can often be converted into a separate, permanent policy for your child once they're an adult.

Does child life insurance require a medical exam?

Insurance companies commonly don’t require a medical or physical exam for child life insurance. But applying for this coverage may include answering questions about risk-related health and safety situations. The insurer decides whether to issue a policy based on those answers.

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Sources

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

1. Mutual of Omaha. “Children’s Whole Life Insurance.”

2. State Farm. “Family Life Insurance.”

3. TransAmerica. “Juvenile Coverage Guidelines.”

4. Assurity. “Whole Life Insurance Product Highlights.” Page 2.

5. American Family Insurance. “Children’s Whole Life Insurance.”

6. New York State Department of Financial Services. “Maximum Life Insurance Limits for Juveniles.”

7. United American Insurance Co. “Our Juvenile Whole Life Insurance Policy Is All About Helping You Leave a Legacy!” Page 3.

8. Washington State Office of the Insurance Commissioner. “Who Can Take Out a Life Insurance Policy on Children?”