Toddler Teenager Insurance
For Life's Unexpectedness

Toddler & Teenager Insurance.

Like a life insurance policy for an adult, a life insurance policy for a child is a contract with an insurance company. Premiums are paid (typically monthly or annually) in return for the promise that the insurance company will pay a death benefit if the child dies.
With an insurance policy for an adult, the policyholder typically is the insured person—the one who is covered by the policy. With a policy for a child, the child is insured, but a parent, grandparent or legal guardian is the policyholder. The policyholder also can be the beneficiary who receives a payout if the insured child dies.

Life insurance policies for children typically are whole life insurance policies, which means they will provide lifelong coverage as long as premiums are paid. Premiums tend to be guaranteed, so they won’t increase over time. Plus, a portion of the premium goes toward building cash value, which can be accessed while the child is alive for any reason.

You can’t buy a term insurance life policy for a child, which would provide coverage only for a certain number of years. However, if you buy a term life insurance policy for yourself, you might be able to add a rider to cover all of your children until they reach a certain age, at which time the coverage likely can be converted to permanent policies for them at an additional cost.
Toddler & Teenager Insurance

FAQ.

he amount you pay also will be affected by the amount of coverage you buy. And it could be affected by the type of payment schedule you choose. For example, you may have the option to purchase a policy that is payable through the child’s age of 65 or 100. The further you stretch out the payment schedule, the lower the premium will be.

It guarantees insurability. The biggest selling point of a life insurance policy for a child is that you’re guaranteeing that your child will have coverage even if he or she develops a health condition later in life. Plus, insurers often offer riders (at an additional cost) that will allow you or your child to purchase more coverage in the future without having to go through a medical exam or proving insurability, Hoang says.

By buying life insurance for a child, you’re not just locking in insurability if your child has a change in health. You’re also ensuring that your child will have coverage if he or she takes up a dangerous hobby, says Steve Meldrum, an insurance specialist with Swell Private Wealth. For example, Meldrum has a 23-year-old client who has had trouble getting life insurance because he is a scuba diver—a hobby that insurers consider a risk to insure.

It allows you to lock in a low rate. You’ll never get a lower rate on life insurance than when a child is a newborn. Rates will increase with each year of life. Of course, you or your child will be paying premiums over a longer period of time. But the amount paid over time still can be lower because of the super low rates for a child. Using the rate example provided by Hoang,  the $44.46 monthly premium for $100,000 of coverage at age 0 will add up to $20,000 less over 65 years than the $126.76 monthly premium for a 30-year-old paid over 35 years.

It provides funds for funeral expenses. The chances of a child dying are low, so funeral costs are not a good reason to buy life insurance on a child. But if that happens, a life insurance policy will provide funds to help cover the cost of final expenses. It also could allow the family to afford to take time off from work to mourn the loss of a child.

If you’re primarily interested in life insurance for a child to cover funeral costs, you likely can add a rider to your own life insurance policy to cover your child for less than what you’d pay for a whole life insurance policy on the child. 

It has cash value. A portion of the premiums paid for a whole life insurance policy go toward building cash value. When you buy a policy for a child, a bigger portion of the premium will go toward the cash value because the cost of insurance is low, and there’s more time for the cash value to build.

“There’s some value in that extra time you get to accumulate cash,” Hoang says. And the cash value can be accessed for any reason. But note that withdrawing cash from the policy could trigger a tax bill and will reduce the death benefit.

Before buying life insurance for a child, make sure you have enough coverage for yourself. Protecting the financial well-being of loved ones takes priority. In fact, insurers usually require that parents have their own life insurance policies with at least as much coverage as they want to buy for a child as a prerequisite for insuring a child.

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