Many insurance companies provide child life insurance policies to assist parents with funeral expenses in the unfortunate event of their child’s passing. It’s wise to weigh the pros and cons of child life insurance before deciding on a policy.
What is Child Life Insurance?
Child life insurance is a policy that pays a predetermined amount to the child’s beneficiary, typically the parents, if the child passes away. The funds can be used for funeral costs or medical bills and may also be donated to a charity in the child’s name. Many insurers offer child life coverage as an add-on to a parent’s life insurance policy, with coverage amounts usually ranging from $10,000 to $20,000.
Who Needs Child Life Insurance?
Traditionally, life insurance is crucial for individuals who have family members reliant on them for financial support. Most financial experts agree that child life insurance is not as essential as adult life insurance since children do not generate income, and statistically, most children do not die before reaching adulthood.
Advantages of Child Life Insurance:
- Premiums for child life insurance are typically very affordable.
- Many companies guarantee continued coverage into adulthood.
- It can cover funeral costs and/or medical expenses in the event of the child’s death.
- Child life insurance can often be converted into an adult life insurance policy when the child turns 21.
Disadvantages of Child Life Insurance:
- The need for child life insurance is generally low.
- Most young adults can secure life insurance coverage later in life.
- Child life insurance may not be feasible for young families.
- Insurance companies might require a medical exam for the child.
How Do I Choose a Child Life Insurance Policy?
The two most common types of child life insurance are term life insurance and whole life insurance. Factors such as your child’s age, your income, savings, and life circumstances will influence which type of policy is most suitable for your family.
Term Life Insurance:
This type of policy is straightforward and affordable. If you select a policy with a term of 20 to 30 years, you will pay an annual premium for that fixed period. If your child passes away during this time, the full coverage amount is paid out.
Whole Life Insurance:
Whole life insurance is more complex and expensive compared to term life. It is a permanent plan that provides lifetime coverage for your child rather than a limited term. The parent holds the policy until the child reaches adulthood, at which point the child becomes the policyholder. Whole life policies accumulate cash value, which grows tax-deferred as the insurance company invests a portion of your premium.
Where Can I Purchase Child Life Insurance?
Look for a reputable company with a strong financial rating. You can check with your state’s insurance department to ensure that a specific company and agent are licensed. Consult your current life insurance provider for details on child life insurance or rider options. You can also ask family and friends for recommendations, compare quotes online, or check with your employer to see if child life insurance is offered as an employee benefit.
Next Steps:
- Find child life insurance options in your area.
- Discuss your child life insurance policy with friends and family.
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