By Hayden Willner, Relationship Manager
Becoming a parent is something most couples look forward to, everyone wants their kids to live long and healthy lives. Which is why child life insurance is not usually a priority. However, it is worth considering, as it can lock in low rates. And guaranteed insurability in the future should your child develop some type of illness or disease. Life insurance for children is usually a whole life policy, which can be 5 to 15 times more expensive than a term policy.
How does life insurance for children work? The policies work similarly to an adult’s policy, the policy holder pays the premiums, and the policy pays out a death benefit to the beneficiary, with a child policy typically that would be the parents. Due to more child policies being whole life, this coverage lasts their entire life as long as the premiums are paid. With a whole life policy, the premiums will not increase over time and a portion of the premium will go towards building cash value, which can be accessed while the child is alive.
The cost of insuring a child varies depending on coverage amount and what method you pay your premiums. The higher the coverage amount the higher the premiums will be. There are a few different options on when you can pay, monthly or annually is the most common. And then there are a few options on how long you will pay, options include a 10-year, 20 year, or payable through the child’s age of 65 or 100. The shorter the payment period the higher your premium will be, but it can be a wise decision if you want to turn over a policy that is already paid off to your child.
Some of the pros of buying life insurance for your child include, guaranteed insurability, locking in a low rate, funeral expenses, and cash value. Guaranteed insurability is the biggest selling point. This guarantees that your child cannot be denied coverage if they develop a health condition later in life. Locking in a lower rate will guarantee the same premium for the life of the policy. Child policies can be purchased from the age two weeks to 17 years old. Regardless of when the policy is purchased that premium rate will continue for life if premiums are paid. No one expects their child to die, but if that unfortunately happens the death benefit of the policy will help cover those expenses.
Some of the cons of a child life insurance policy are, coverage limits tend to be low, it is a long-term commitment, and it can be a financial trade off. Coverage on a child policy can be limited, several insurers have limited coverage to $50,000 to $75,000. That will not be enough coverage once your child is an adult, and they will likely need to buy a new policy with enough coverage for their needs. Child life insurance is a long-term commitment, when buying a policy, you should expect to pay the premiums for decades. Finally, it is a financial trade-off, when you buy a child life policy you are taking money you could be using to support your child in other ways.
When deciding if a child life insurance policy is right for your family, make sure you first have enough coverage for yourself. If a child policy is something at you are interested in, make sure it fits your current budget. If you have a family history with genetic medical conditions getting a policy on your child may be a wise decision. While child life insurance policies are not as common as an adult policy, they may be something your family should look into and consider.