What Is Child Life Insurance?

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.

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.

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.

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:

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)