Supplemental Child Life Insurance: Adult Children's Eligibility

Life insurance is a complex topic, and when it comes to insuring adult children, there are a few things to consider. Firstly, it's important to understand the difference between term and whole life insurance. Term life insurance provides coverage for a specific period, whereas whole life insurance offers lifelong coverage. When it comes to adult children, whole life insurance may be more suitable as it provides coverage for their entire lives, but it tends to be more expensive.

Supplemental life insurance is an additional layer of coverage that can be purchased on top of an existing policy, often through an employer. This type of insurance can include coverage for a spouse or child, with lower coverage limits and higher premiums. It's important to note that group term policies through work are usually tied to employment, meaning if you leave your job, you may lose your coverage.

When considering life insurance for adult children, it's essential to weigh the pros and cons. On the one hand, life insurance can guarantee future insurability, provide a savings vehicle, and cover costs in the event of an accident or death. On the other hand, life insurance for adults may not offer the same level of benefits as it does for children, and the rates of return may be lower.

In conclusion, while supplemental life insurance can be a valuable addition to an existing policy, it may not be necessary for adult children who are relatively healthy and have no pre-existing conditions. It is important to assess your family's specific needs and financial situation before making a decision.

What is supplemental life insurance?

Supplemental life insurance is an optional coverage that provides an extra layer of protection on top of the group policy your employer provides. It is typically purchased through the workplace and can be a useful add-on to an existing policy. It can include coverage for a spouse or child, or coverage that pays out if you are seriously injured or killed in an accident.

Supplemental life insurance is usually purchased in addition to a standard life insurance policy and is offered through an employer's benefits package or directly from an insurer. It is designed to fill the coverage gaps that an existing policy may lack. For example, if your employer's basic life insurance coverage wouldn't be enough for your beneficiaries in the long run, you may be able to buy supplemental life insurance through work to increase your total death benefit.

Supplemental life insurance policies have higher coverage limits, but you typically pay the premiums. In general, only full-time employees or those who work a minimum number of hours are eligible for supplemental life insurance policies. Plus, companies typically require you to enroll in the basic life insurance they offer before you're eligible for supplemental coverage.

Supplemental life insurance can be a good way to take advantage of some additional protection for your family. However, it's important to note that it may not be enough coverage, as many life insurance policies offered through employer-sponsored plans are typically only one or two times your annual salary. Additionally, it may be a limited accidental death and dismemberment (AD&D) insurance policy, which only pays out if the insured dies in an accident.

When deciding if supplemental life insurance is right for you, consider your budget and your beneficiaries' needs. Think about how many dependents you're providing for and how long they might need financial support. Also, consider any long-term expenses such as your mortgage and your children's college tuition.

What are the pros and cons?

Pros

• It guarantees the child's future insurability, even if they develop a serious medical condition or take up a dangerous hobby later in life.
• It locks in a low rate for life insurance at a young age, which can be beneficial if the child chooses a risky career as an adult.
• It can be used as a savings vehicle for the child, with the cash value of the policy growing tax-deferred. The child can use this money for expenses such as school fees or a down payment on a home.
• It covers costs in the event of the child's death, including burial costs or grief counselling.

Cons

• Children have a low rate of mortality, so the rate of return on whole life insurance plans for children is poor.
• It is a long-term financial commitment, with lifelong premium payments.
• Coverage amounts tend to be low and may not meet the child's needs as an adult.
• The money spent on premiums could be used on other financial priorities, such as building an emergency fund or saving for retirement.

When should you buy it?

Supplemental child life insurance is an extra layer of coverage added to an existing policy and is usually purchased through an employer. It can be a useful safety net, but it is not always necessary. Here are some scenarios where buying supplemental child life insurance may be a good idea:

• Your child has a medical condition: If your child has a serious medical condition or your family has a history of genetic medical issues, it may be beneficial to invest in supplemental child life insurance. This guarantees their future insurability and locks in lower rates.
• You want to secure their future insurability: If you want to ensure your child can get life insurance as an adult, regardless of their health or occupation, supplemental child life insurance can help. It guarantees their future insurability and gives them the option to purchase additional coverage later in life.
• You want to build cash value: Supplemental child life insurance policies often have a cash value component that grows over time. This can be used for various purposes, such as college tuition, a down payment on a home, or retirement.
• You want to cover final expenses: While the chances of a child dying are low, a supplemental life insurance policy can provide funds for funeral expenses and allow grieving parents time off work.
• You have group life insurance through your employer: If you already have group life insurance, adding supplemental coverage for your child can be convenient. However, keep in mind that group policies are often tied to your employment, and you may lose the coverage if you leave your job.
• Your child is a teenager contributing to household expenses: If your child is a teenager and is working part-time to help cover household expenses, you may want to consider supplemental child life insurance to protect their income.
• Your child is in a high-risk profession: If your child takes up a dangerous hobby or pursues a high-risk career as an adult, it may be challenging for them to get life insurance later. Supplemental child life insurance guarantees their coverage regardless of their future occupation.

Before purchasing supplemental child life insurance, it is essential to weigh the pros and cons, assess your budget, and ensure that your own life insurance needs are adequately met. It may be a good idea to consult a financial planner to determine if this is the best use of your money.

How much do you need?

When deciding how much supplemental life insurance you need, start by asking yourself two questions:

• How much of your income do others depend on?
• Is your current group life insurance policy enough to cover those costs?

The amount of supplemental life insurance you need, if any, depends on the costs your income covers. Here are some scenarios that might call for more coverage:

You have a child or care for an ageing parent

If you have a child or care for an ageing parent, you have more dependants and your income is supporting more people.

You buy a house

You may need additional coverage for future mortgage payments.

You get married

You may want to protect your spouse from unforeseen costs if you die.

Your spouse stops earning an income

If your spouse is no longer earning an income, you may be the primary source of income for your family.

Your monthly expenses increase

If your monthly expenses increase, you may need additional coverage.

Your child starts college

You may need coverage for future fees.

Use a life insurance calculator to find out how much coverage you need.

Buying life insurance outside of work

The open market typically offers a greater choice of life insurance products than workplace plans. You can also buy higher coverage amounts than with employer-based plans.

• Term or permanent life insurance that supplements your basic policy from work.
• Child life insurance for dependent children.
• Final expense life insurance to cover burial or funeral costs.
• Short- and long-term disability insurance.
• Accidental death and dismemberment (AD&D) insurance not tied to your workplace.
• Life insurance riders that add specific coverage to an existing policy.

Where is the best place to buy it?

Where is the best place to buy supplemental child life insurance for adult children?

The best place to buy supplemental child life insurance for adult children depends on your circumstances and what you want from the policy.

If you have group term life insurance through your employer, you may be able to buy supplemental life insurance for your child as an add-on to your basic coverage. This is typically known as voluntary life insurance. However, it's important to note that these policies often have higher premiums than a private policy, and they are usually tied to your employment, meaning you may lose your coverage if you leave your job.

On the other hand, buying a policy on the open market will give you a wider choice of policy types and coverage amounts. You can also buy higher coverage amounts than with employer-based plans. You may be able to secure lower rates on the open market if you are young and healthy and choose coverage with full medical underwriting.

If you're specifically looking for child life insurance, you can buy a standalone whole life policy for your child or add them to your own policy as a rider. Some companies that offer standalone child life insurance policies include:

• Aflac
• American Family
• Foresters
• Gerber Life
• Globe Life
• Mutual of Omaha

If you're adding your child to your own policy, be aware that the age threshold for this option may vary depending on the company.

Frequently asked questions