Life Insurance For Daughters: What Parents Need To Know

Life insurance for children is a permanent life insurance policy that provides a fixed death benefit to the beneficiary if the insured child dies while covered. It can also be used as a long-term savings mechanism, as the policy typically includes a cash value component that grows over time.

In most cases, only birth or adoptive parents, or court-appointed legal guardians, can take out life insurance on children under age 17. Children age 15 or older must sign any life insurance application taken out on them. If another family member (such as a grandparent) wants to buy a policy for a child, they must first get written consent from the child's parent or legal guardian.

Who can take out life insurance on a child?

In most cases, only birth or adoptive parents, or court-appointed legal guardians, can take out life insurance on children under the age of 17 or 18. Children aged 15 or older must sign any life insurance application taken out on them. If another family member, such as a grandparent, wants to buy a policy for a child, they must first get written consent from the child's parent or legal guardian.

In Washington state, there are rules to prevent someone from buying juvenile life insurance for fraudulent purposes. The insurance company will review your application to make sure the policy benefit is proportional to the value of the life insurance or accidental death benefits issued to the child's other siblings or immediate family members.

Pros and cons of child life insurance

Pros

• Guaranteed future insurability: If your child has a serious medical condition or your family has a concerning medical history, a child life insurance policy can guarantee future insurability. This means that even if your child develops a serious medical condition at a young age, they will still be covered by insurance as an adult.
• Access to cash value: Depending on the policy, your child may be able to claim cash value or take out loans against the policy's accrued cash value. This can help with college tuition, a down payment on a home, or other essential expenses.
• Final expenses: In the devastating event of a child's death, a life insurance policy can help cover funeral costs and other final expenses. This can provide financial relief for grieving parents and family members.

Cons

• Poor rate of return: Children typically have lower mortality rates, which can result in a poor rate of return on whole life insurance plans.
• Long-term expenses: Child life insurance policies often require lifelong premium payments, which can be a financial burden for families.
• Low coverage amounts: Coverage amounts for child life insurance policies tend to be low, usually $50,000 or less. These amounts may not meet your child's needs later in life, and additional insurance may be necessary.
• Financial trade-off: The money spent on child life insurance could be used for other things that directly support the child's well-being and development.
• Alternative investment options: There are other investment options, such as 529 college savings plans, that may offer higher returns over time compared to the cash value growth of a life insurance policy.

Child life insurance can provide peace of mind and financial protection in the unfortunate event of a child's death. However, it is important to carefully consider the pros and cons before making a decision, as the added expense may not be necessary or the best use of your financial resources.

When does child life insurance make sense?

Child life insurance covers the life of a minor and is typically purchased by a parent, guardian, or grandparent. While it's not a top priority for most parents, there are certain situations in which it could make sense. Here are some factors to consider when deciding if child life insurance is right for your family:

• Insurability: Child life insurance can guarantee future insurability for your child, especially if they have a serious medical condition or if your family has a history of medical issues. This ensures that your child will have coverage later in life even if they develop health problems.
• Premium Rates: Buying life insurance for a child locks in lower premium rates. The younger the insured person, the cheaper the premiums will be, and these low rates are guaranteed for the duration of the policy.
• Savings: Whole life insurance policies for children have a savings component called the cash value, which grows over time. The child may be able to use this money for college tuition or other expenses later in life.
• Peace of Mind: Child life insurance can provide peace of mind by covering final expenses and funeral costs in the unlikely event of your child's death. It can also help cover the costs of running a business or taking time off work during a difficult time.
• High-Risk Careers: If your child chooses a high-risk career as an adult, such as becoming a firefighter, it may be more difficult and expensive for them to get life insurance. Child life insurance can make it easier to maintain coverage in adulthood.

It's important to weigh the pros and cons before purchasing child life insurance. While it offers certain benefits, there are also some drawbacks, such as low rates of return and long-term expenses. Additionally, you should assess your budget and ensure that your own life insurance needs are met before considering a policy for your child.

How does child life insurance work?

Child life insurance is generally offered in the form of term or whole life insurance. Term life insurance provides coverage for a set amount of time, while whole life insurance provides coverage for the child's entire life. Whole life insurance policies are more common for children and provide a fixed death benefit to the beneficiary if the insured child dies while covered.

There are two ways to buy life insurance for a child: as a separate life insurance policy specifically on the child, or as a "children's term life insurance" rider on a parent's policy. The rider pays out if the child passes away, but the coverage ends if the parent dies first. The rider can sometimes be converted to a permanent policy for the child once they reach a certain age.

Whole life insurance policies for children typically provide lifelong coverage as long as premiums are paid and tend to have guaranteed premiums that won't increase over time. A portion of the premium goes toward building cash value, which can be accessed while the child is alive, for any reason. The cash value of a child's life insurance policy grows tax-deferred, meaning taxes on gains are paid only when the money is withdrawn.

Child life insurance is often sought by parents who want to guarantee their child's future insurability. For example, if a child has a serious medical condition or the family has a history of medical issues, a child life insurance policy can provide coverage later in life when it might otherwise be cost-prohibitive or difficult to obtain. Child life insurance can also be used as a long-term savings mechanism to cover future expenses such as college tuition or a down payment on a home.

However, there are some drawbacks to child life insurance. Children have lower mortality rates, which can result in a poor rate of return on whole life insurance plans. The coverage amounts tend to be low, typically $50,000 or less, and may not meet the child's needs as an adult. Additionally, there may be more lucrative investment options for saving for a child's future.

How much does child life insurance cost?

The cost of child life insurance depends on several factors, including the child's age, gender, coverage amount, policy type, health history, and the insurance company. Here are some key points to consider:

• The younger the child, the lower the premium tends to be. Insuring a child locks in a low rate that remains the same over time.
• The cost is also influenced by the coverage amount. The larger the death benefit, the higher the premium.
• The payment schedule can impact the cost. Stretching out the payments over a longer period, such as until the child reaches 100 years of age, can lower the premium.
• The policy payoff period also affects the cost. A shorter payoff period, such as 10 or 20 years, will result in a higher premium.
• The type of policy chosen, such as whole life or term life insurance, will impact the cost. Whole life insurance tends to be more expensive but offers lifelong coverage, while term life insurance is cheaper but expires after a certain period.
• The insurance company's rates and fees will vary, so it's important to compare multiple options.
• Adding a child rider to your own life insurance policy is typically more affordable than purchasing a separate child life insurance policy.
• The child's medical history and health conditions may affect the cost, with higher-risk children potentially having higher premiums.

Frequently asked questions