Should I Buy Life Insurance for My Child? Pros & Cons

Child life insurance is a policy covering a child, bought by a parent, guardian or grandparent. It builds cash value over time and guarantees the child can get life insurance as an adult, regardless of health changes between purchase and maturity. Most child life policies are whole life insurance with death benefits ranging from $10,000 to $25,000 (or $50,000 in some companies). The parent acts as policyholder and beneficiary until the child reaches a certain age.

For lower costs, add a child rider to a parent's existing policy. It covers one or multiple children under a single add-on. A child rider costs less than buying a separate policy. It continues until the child turns 18, 21, 25 or 26, depending on policy terms.

You'll pay the life insurance premiums until the ownership transfers to your child at a certain age, typically 18, 21, 25 or 26. Your child can continue coverage, increase coverage amounts, cancel the policy and receive the cash value, or borrow against accumulated funds.

Children who develop health conditions between purchase and adulthood still qualify for life insurance coverage increases without a medical exam.

Child life insurance offers guaranteed future insurability but comes with tradeoffs. The policies lock in coverage and build cash value, but they offer limited death benefits and slower cash value growth compared to other financial products.

Insurance regulations and available options vary by state. Talk to a licensed agent in your state for specific requirements and available products.

Child life insurance locks in future coverage and builds some cash value, but most families have better uses for the money. Get your own life insurance first because adult coverage protects the household's primary income. After you've secured parental coverage and an emergency fund, a child policy is worth considering.

Death benefits are low and cash value builds slowly, so these policies rarely beat 529 plans or other investments. Child life insurance makes the most sense when a child has a health condition that makes future coverage uncertain, or when the child earns substantial income that needs protection. Healthy children in budget-conscious households don't need it.