Nobody likes thinking about life insurance for a child. Parents and grandparents buy it less for the death benefit and more for what it protects. That's the child's ability to be insured at all, no matter what their health looks like at 25 or 45. And the premium is fixed at a young age.
A children's whole life policy is a small permanent policy, often for $10,000 to $50,000, with a premium that never changes. Ownership can be transferred to the child as an adult, and the cash value then belongs to them. Cash value is an amount that builds up inside the policy. Most policies include a guaranteed insurability option. It's a rider, an extra feature built into or added to the policy. It lets the child buy more coverage at set ages without evidence of insurability, meaning without proving their health.
Some parents choose a 20-pay policy, paid over 20 years. The coverage is fully paid up by the time the child is grown, so they hand over a policy with no premiums left. Others add a child rider to their own term policy instead. That's cheaper, but it ends when the parent's term does. I'll explain both and help you pick.
Important to know about children's whole life insurance
- Guarantees are backed by the claims-paying ability of the issuing insurance company.
- Dividends, where offered, are not guaranteed.
- Policy loans and withdrawals reduce the cash value and death benefit and may cause the policy to lapse.
- This is a general description; the policy controls.