Can Grandparents Buy Life Insurance for Grandchildren?

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Updated: July 9, 2024

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Grandparents considering financial protection for their family might explore purchasing life insurance for their grandchild. In this arrangement, the grandchild is the insured, and the grandparent or another designated person is the beneficiary.

There are many reasons for grandparents to buy life insurance for their grandchildren, from securing a financial safety net to creating an investment tool for the child's future expenses, including education. These policies grant the grandchild life insurance benefits that can serve as a cornerstone for future financial stability. However, it's important to note that parental consent is typically necessary to purchase a policy on a minor.

Understanding the benefits, drawbacks, available plans and other factors can help grandparents navigate this financial tool and determine whether purchasing life insurance for grandkids aligns with their goals and circumstances.

Key Takeaways

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Life insurance for grandchildren offers financial security, future savings and guaranteed insurability.

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Permanent policies like whole life insurance for children build cash value over time.

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Evaluating your financial situation and coverage needs will help you choose the best policy for your grandchild.

How Life Insurance for Grandchildren Works

Life insurance for grandchildren is a financial instrument that offers more than just coverage; it can be a strategic financial tool for grandparents. With these types of policies, the grandparent purchases a plan for the grandchild, who is the insured. The beneficiary can either be the grandparent or another designated person.

These policies can serve your family in a few different ways:

  • Safety Net for the Family: Life insurance for grandchildren serves as a financial buffer for the family. In certain circumstances, such as the grandchild's premature passing, the policy ensures the family has the necessary funds to manage expenses without additional financial stress.

  • Long-Term Investment for the Grandchild: Beyond immediate coverage, life insurance for grandchildren can function as a long-term investment. Some policies, such as whole life insurance for kids or universal life insurance for children, increase cash value over time. This accumulated value can become a significant financial resource for the grandchild's future needs, such as educational expenses or startup capital for a business venture.

  • Financial Security for the Grandchild: As they mature, the grandchild can access the accumulated cash value from policies like child whole life insurance for various financial needs, giving them a head start on financial planning and security.

Whether the goal is to offer a safety net, build a long-term investment or ensure financial security, choosing the best life insurance for grandchildren requires careful consideration of the grandchild's needs.

Insurance Contract Parties

Before purchasing a life insurance policy for your grandchild, it's helpful to understand the different roles within the contract. An insurance contract typically involves three key parties with distinct roles and responsibilities:

  • The Insured: The insured is the individual whose life the policy covers. In this context, the grandchild is the insured. The policy aims to provide coverage for their life, with the benefits distributed upon their passing.

  • The Policyholder: The policyholder is the individual or entity responsible for maintaining the policy. They pay the premiums and make critical decisions regarding the plan. In this scenario, the grandparent assumes the policyholder's role, ensuring the policy remains active with timely payment of premiums.

  • The Beneficiary: The life insurance beneficiary is the designated individual or entity set to receive the death benefit upon the insured's passing. Depending on the policy's goals, the beneficiary could be a parent, a grandparent or even a trust. The death benefit provides financial support, helping to cover costs associated with the insured's passing or serving other financial needs.

When purchasing a policy for your grandchildren, consider your financial circumstances and who would benefit most from being the beneficiary.

Insurable Interest Explained

Insurable interest refers to an aspect of insurance contracts stating that the person buying the insurance policy has a legitimate interest in preserving the insured's life. It ensures the purchaser isn't using the insurance contract for speculative or illegal purposes.

Regarding life insurance for grandchildren, insurable interest exists when the policyholder (the grandparent) is likely to suffer loss if the insured grandchild were to pass away. The grandparent might suffer emotionally or financially due to their grandchild's passing.

The concept of insurable interest in life insurance for grandchildren extends beyond the potential loss. Grandparents typically have a vested interest in their grandchildren's well-being and, in many cases, wish to ensure their grandchildren's financial future. They may look to children's life insurance policies to contribute to future expenses like educational costs or provide a financial cushion for the grandchild's adult life.

Benefits and Drawbacks of Life Insurance for Grandchildren

Deciding whether or not to take out a life insurance policy on your grandchildren requires you to consider how well it suits you and your family's unique needs and circumstances. Below, we weigh the benefits and drawbacks of these policies so you can make an informed decision.

Benefits of Insuring Grandkids

Getting life insurance for grandchildren can be a strategic move with several potential benefits for both grandparents and their grandchildren.

  • Financial Security: One of the main advantages of life insurance for grandkids is the financial security it provides for the family. If a grandchild were to pass away unexpectedly, the policy would pay out a death benefit. This money could help cover funeral costs, medical bills or other associated expenses, alleviating financial stress during a difficult time.

  • Investment Tool: Some life insurance policies, particularly whole life insurance, have a cash value component. This benefit means that over time, a portion of your premiums builds up into a cash value. You can borrow against this or withdraw this cash value, providing a potential source of funds for future expenses like college tuition or a down payment on a house.

  • Guaranteed Insurability: Life insurance policies purchased for grandchildren may offer a guaranteed insurability rider. This rider guarantees that the grandchild will be able to obtain life insurance coverage in the future, regardless of any health conditions they may develop.

The benefits of a life insurance policy could protect your family's future in differing ways, making it a unique financial approach for grandparents to consider.

Drawbacks of Insuring Grandkids

While purchasing life insurance for grandchildren can have advantages, weighing these against the potential downsides will help you avoid pitfalls. Here are some considerations to keep in mind:

  • Cost: Grandchild life insurance policies can be costly, particularly whole life insurance for grandchildren. Over time, these costs can accumulate, potentially straining your financial resources. This cost can be especially significant if you manage your expenses on a retirement income.

  • Unnecessary Coverage: Life insurance primarily provides financial support to dependents in the event of the policyholder's death. However, most grandchildren are not financial providers, so the coverage may not be necessary for the grandparent. Evaluating whether the premiums' cost outweighs the policy's potential benefits is wise.

  • Better Investment Options: While life insurance can be an investment, other options may offer better returns. For instance, a 529 college savings plan can help you save for future educational expenses. These plans often offer tax advantages and could provide a higher return on investment for this specific purpose. It may be worth exploring these alternatives before deciding on a life insurance policy.

The choice to purchase life insurance for your grandchildren may depend on your available options and your financial goals.

Types of Life Insurance for Grandchildren

There are several types of life insurance policies to choose from. If you're looking for a policy for your grandchildren, you may want to start with the most common types of life insurance policies grandparents purchase for their grandkids:

  • Term Life Insurance: This is a policy that offers coverage for a specific period or "term." This period could be 10, 20 or even 30 years. If the grandchild, the insured in this case, outlives the term, the policy expires without any remaining value. It's like renting a safety net for a certain period. If you don't use the death benefit, it goes away at the end of the term. This type of insurance is typically more affordable than whole life insurance but offers no financial benefit if the policy ends unused. Depending on the insurance company, term life insurance may not be available if the child is a minor.

  • Whole Life Insurance: This provides coverage for the insured's whole life. As long as you pay your premiums, the whole life insurance for grandchildren remains in effect. Whole life insurance policies also have a cash value component. Cash value means a portion of your premiums builds up into a cash value over time. This cash value can be accessed in the future, providing a potential source of funds for college tuition, a house down payment or even retirement.

Choosing the best life insurance policy for your grandchildren will depend on the benefits you value most for your family and the type of policy you can manage.

What If the Grandchild Is a Minor?

The most common type of life insurance policy for minors is whole life insurance. Since this policy offers lifetime coverage and a cash value component that grows over time, it's like buying them a safety net and a savings account. Insurance companies usually require parental consent if you purchase life insurance for a minor.

Once your grandchild reaches adulthood, depending on the policy terms, you may be able to transfer the policy to them. A transfer means they take over paying the premiums and become the policyholder. This transfer can be a valuable financial gift, providing them with both life insurance coverage and a potential source of savings.

Life Insurance for Teenagers

Life insurance for teenagers provides a foundation for financial security early in life. These policies can either be term life insurance for minors or permanent plans like whole life insurance for children. Starting life insurance at a young age ensures lower premiums and guarantees future insurability, regardless of health changes as they grow older. Additionally, it offers financial support for families during unexpected hardships. Investing in life insurance for teenagers is a strategic move that can also serve as an early financial education tool, teaching young individuals about long-term planning and fiscal responsibility.

Baby Life Insurance

Baby life insurance, typically in the form of whole life insurance for infants, is not only about providing financial protection in the event of an unthinkable tragedy — it's also an investment in the child's future financial stability. These policies accumulate cash value over time, which can later be used for educational costs, purchasing a first home or even starting a business. Infant life insurance ensures that children have coverage from the earliest stages of life, with benefits like guaranteed future insurability and locked-in low rates. It's a thoughtful gift from parents or grandparents who want to secure a child's financial prospects from the very beginning.

How to Set Life Insurance Coverage Levels

Deciding how much life insurance to buy for your grandchild involves carefully considering your circumstances. Here are some key points to keep in mind:

  • Purpose of the Policy: The reasoning behind the life insurance policy will significantly influence the coverage amount. For instance, if the policy is more of a financial safety net, you might opt for a higher coverage amount.

  • Financial Situation: Your current financial situation is another critical factor. While providing a substantial policy for your grandchild is beneficial, ensuring that the premium payments fit comfortably within your budget is equally important.

  • Grandchild's Future Needs: If you want to build up the cash value component of a life insurance policy, consider your grandchild's potential future needs. These could include education expenses, a first car, a home down payment or even funds for starting a business. The policy should be substantial enough to support these potential needs.

  • Possible Coverage Limitations: Some insurers may have restrictions on the coverage amount, policy type or other features for policies issued on minors. For example, there might be a maximum amount of child life insurance coverage you can purchase, or certain riders or benefits may not be available.

By weighing these considerations, grandparents can make informed decisions about the appropriate amount of coverage, ensuring it reflects their aspirations for their grandchild's future and the practicalities of their current financial capabilities.

How to Buy Life Insurance for Grandchildren

Here's a step-by-step guide to help you navigate the journey of purchasing life insurance for your grandchildren:


Start by familiarizing yourself with the different types of life insurance policies available for grandchildren. Typically, whole life insurance policies are available for minors, providing both death benefits and a cash value component. Term life insurance may also be an option in some cases. Understand the features, benefits and potential drawbacks of each type. This process could involve online research or reaching out to insurance agents.

Compare Quotes and Insurance Companies

The next step is to shop around. Get life insurance quotes from different insurance companies and compare them. Look at each policy's coverage levels, the cost of premiums and the insurance company's reputation. This practice will help you find the best life insurance for your grandchildren at the most affordable price.


The application process may involve providing information about the grandchild's health and medical history. Be prepared to answer these questions honestly and accurately. Any discrepancies, such as incorrect, incomplete or misleading information, can lead to complications down the line, such as cancellation of the policy or denial of a claim.

Certain health conditions may lead to denial of the policy altogether. For example, if the child has a chronic illness that the insurer considers high-risk, it may affect their eligibility or the policy's terms.

Review and Purchase

Once the application is approved, you'll receive a policy proposal. Review this document carefully to ensure it aligns with your expectations and that you understand all the terms and conditions.

At any point in the process, you may consult an insurance professional or financial advisor who can provide personalized advice based on your specific circumstances and goals. Once everything is in order, you can proceed with the purchase. Remember that the policy only comes into effect once you pay the first premium.

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Parents can also purchase life insurance for their children, offering similar benefits to policies bought by grandparents. These policies, such as whole life insurance for kids or child term life insurance, provide financial protection and a potential investment vehicle. Buying life insurance early ensures lower premiums and future insurability, regardless of health changes. Additionally, it allows parents to build cash value over time, which can be used for future expenses like education or starting a business.

Who Should Buy Life Insurance for Their Grandchildren

Deciding whether to purchase life insurance for your grandchild involves determining if it aligns with your financial goals and family needs. Here are key points to consider:

  • Financial Security: Life insurance policies can provide a financial safety net. In the unfortunate event of the grandchild’s passing, the policy offers a death benefit to help cover expenses such as funeral costs and medical bills, easing financial stress during difficult times.

  • Investment in the Future: Permanent policies like whole life insurance for kids accumulate cash value over time. This cash value can be accessed for significant future expenses, such as education, a down payment on a house or starting a business, providing a financial foundation for the grandchild’s future.

  • Child's Guaranteed Insurability: Purchasing life insurance at a young age ensures the grandchild has coverage regardless of future health issues. This guaranteed insurability is a significant benefit, ensuring they can secure additional coverage if needed later in life.

  • Cost Considerations: While life insurance offers many benefits, the cost is an essential factor. Permanent life insurance for grandchildren can be more expensive than term policies, and the long-term financial commitment should fit comfortably within your budget.

  • Alternatives: Evaluate other investment options, such as 529 college savings plans, which might offer better returns for specific goals like education funding. These plans often provide tax advantages that life insurance policies do not.

By considering these factors, you can determine whether life insurance for your grandchild is the right choice for your family's financial planning strategy.

FAQ About Buying Life Insurance for Grandchildren

Below are some answers to common questions you may find helpful when deciding whether to buy life insurance for your grandchildren.

Can grandparents get life insurance on grandchildren without parental consent?
Is life insurance a good investment for grandchildren?
How can you buy insurance for your grandchildren?
What is the best life insurance policy for a child?
What is child life insurance?
Is there an age limit for child life insurance?
What is child voluntary life insurance?
Is life insurance for a child worth it?
Should you buy whole life insurance for your child?
How long do you want life insurance with kids?
How can you get child life insurance quotes?
What is supplemental child life insurance?
Why should you get life insurance for a child?

About Melissa Wylie

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Melissa Wylie is the Content and SEO Manager at MoneyGeek, with nearly a decade of editorial experience and six years of work in financial content focused on small businesses. She previously held SEO positions at Bankrate and LendingTree, with bylines on ValuePenguin and MagnifyMoney.

Wylie has a journalism degree from the University of North Texas. Her strong foundation in journalism helps her craft content that simplifies complex financial topics to help everyone feel confident when making decisions with their money.