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Life Insurance for Children

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People often focus on setting up life insurance policies for themselves to provide financial coverage to loved ones when they pass away, but it may be financially beneficial to set up policies for children as well. Child life insurance policies are one way to provide coverage for life-threatening illnesses a child may face, lock in their insurability or could even be an investment vehicle. There are advantages and disadvantages to this approach, which leaves many parents or guardians wondering if they should purchase a life insurance policy for their child. Bankrate’s insurance editorial team discusses this in greater detail so you can decide if it is the right choice for your family.

Should you buy life insurance for children?

Unsure whether or not to purchase life insurance for your child? Here are four of the most common reasons families may want to purchase life insurance for their children.

Why you should consider buying life insurance for children

The chances you’d outlive your child or grandchild are extremely low. Nevertheless, there are reasons why you might want to buy a kids’ life insurance policy. According to insurance expert, Laura Adams, “The purpose of having different types of insurance is to reduce financial risk and give you peace of mind. When it comes to life insurance for children, there are pros and cons parents should consider.” Take a look at when life insurance for children is ideal.

If your child suffers from a life-threatening illness

Life insurance for children could be a good idea if your child suffers from a debilitating or chronic illness. Larger amounts of life insurance would require a medical exam, but you could buy insurance for smaller amounts to cover burial costs, such as final expense insurance, without the child having to undergo a health check.

If your family is genetically predisposed to certain conditions

If you’re concerned that your child may inherit a genetic or medical condition, buying life insurance for your child before the condition becomes chronic or life-threatening could lock in future life insurance when the child becomes an adult. Examples include:

  • Chromosomal disorders
  • Monogenic disorders, like Cystic Fibrosis
  • Genetic disorders

Imagine a scenario of a child developing a medical condition that wouldn’t be insurable. Adams says, “Purchasing a permanent life policy early in the child’s life guarantees they have at least that much coverage as an adult. And if your child dies, the policy would help you pay funeral expenses and other costs.”

You can choose between purchasing term life insurance or whole life insurance.

You could choose a term life insurance policy policy with guaranteed renewal or that can be converted into a permanent life policy ahead of its expiration. Term life insurance policies are generally cheaper due to the decreased likelihood of a policyholder passing during the term length and typically don’t require a medical check at renewal or conversion.

Or you could purchase a permanent or whole life insurance policy early on. Wondering if whole life insurance is worth it? Whole life policies are typically more expensive, but the rate will be locked in for life. As long as your child continues to pay for the policy through adulthood, the rates and coverage won’t change.

Why you should not buy life insurance for children

Some life insurance companies may recommend choosing a whole life policy to serve as both financial protection for your child’s life and as a college savings. A whole life policy is permanent — it has no expiration date and has a cash value portion to it. The premium you pay goes towards the death benefit and a portion goes into a cash value account However, if savings is your primary goal, other avenues may be more effective investments compared to the premiums you’d pay into a policy.

According to Adams, “While a permanent life policy accumulates a cash value over time that you can use for any purpose, the main downside is that it may have relatively high fees and not be the best investment vehicle. You may come out ahead by using a 529 college savings plan or a regular investment account.“

Pros and cons of buying life insurance for your child

It may be helpful to look at the pros and cons of purchasing life insurance for your child prior to making your decision.

Pros Cons
May guarantee your child’s insurability Cash value has a low rate of return
May help lock in a low rate for your child’s coverage Low coverage limits (usually)
Provides funds for funeral expenses
Savings component if you have a cash value

Purchasing life insurance for your child can help them be more insurable in the future by locking in a health rating that they can use for the rest of their life. Even if they were to develop diabetes, they would typically be able to get competitive health insurance at a lower cost than if they had not been insured already at a young age.

In the future, your child could choose to use the cash value portion of their policy by borrowing against it, withdrawing those funds or even surrendering the policy. In the event that the worst happens and your child were to pass away, having a policy in place could allow you more space to focus on grieving rather than worrying about the finances of an expensive funeral.

On the flipside, child life insurance is not for everyone. Cash value accounts usually have a low rate of return and these policies typically have a low coverage limit.

Where to purchase life insurance for kids

If you’re interested in purchasing the best life insurance for kids, you have several competitive life insurance companies to choose from. After reading about their policy offerings, you may want to consult a licensed insurance agent and generate a few quotes to see where you can save the most money. A few top insurers are:

  • Gerber Life: While Gerber is best known for selling baby food and products, the company also has a life insurance division known as Gerber Life. You can buy permanent life insurance policies for children between the ages of birth to 14 for an amount of $10,000 to $50,000.
  • Mutual of Omaha: Mutual of Omaha sells whole life insurance for children. You can purchase a policy for a child as young as 14 days old until they’re 17 years of age. Benefit amounts are between $5,000 and $50,000 and can be purchased online or through an insurance broker.
  • Transamerica: Transamerica drops the minimum on life insurance for children. You can buy a policy with a value of $1,000 to $50,000 for an infant or child up to 17 years old. To get more information about child life insurance from Transamerica, you would need to speak with an agent or visit a local participating broker.
  • Foresters Financial: The highest-value kids life insurance can be found through Foresters Financial. It was recently introduced and offers coverages of $5,000 to $75,000 for kids up to the age of 17. You’ll need to connect with an agent to get a quote or buy life insurance.

Frequently asked questions

Written by
Cynthia Paez Bowman
Personal Finance Contributor
Cynthia Paez Bowman is a former personal finance contributor at Bankrate. She is a finance and business journalist who has been featured in Business Jet Traveler, MSN, CheatSheet.com, Freshome.com and TheSimpleDollar.com.
Edited by
Insurance Editor