Consumers often misunderstand the purpose of life insurance for children. While the primary role of life insurance is income replacement, children don't generate income, making the decision multi-faceted. In a child life insurance policy, you, the parent, serve as the beneficiary, not your child. The death benefit from such a policy provides financial support in the unfortunate event of a child's passing.
These policies can also complement other financial planning tools like 529 college savings plans, acting as a tax-deferral mechanism to secure your child's future. It's worth noting that life insurance policies for children are typically affordable relative to adult policies but tend to offer lower coverage amounts.