Child & Grandchild Insurance

Juvenile Policies

Few insurance carriers offer standalone policies for children. Here, standalone means a policy where the child is the only insured on the policy. Of the carriers that do offer standalone juvenile policies, the parent, grandparent, or legal guardian is the owner of the policy. After all, policies are contracts and one must be of legal age to enter into a contract.

Rates and Riders

Although the majority of carriers do not offer standalone juvenile policies, most do allow children and—depending on the carrier—sometimes grandchildren to be added to a parent’s or grandparent’s policy as a rider. Riders are additional policy parts added to the main policy. A child rider allows the addition of children and sometimes grandchildren.

Rider rates are fairly negligible, often as low as $1 per month or less per unit of coverage, regardless of the number of children on the policy. In other words, the $1 per month per unit of coverage is not per child, but rather the cost to cover all children on the policy. Costs can vary significantly from carrier to carrier, but it is always worth including minor age children in an initial quote to compare the cost benefits. 

Conversion Benefits

Policy conversion benefits allowing the child on a rider to convert to a standalone policy at adulthood without proof of insurability can be critically important in these instances. Also permanent policies that build cash value can provide payouts for medical or other expenses by exercising living benefits offered in the policy.

Rider vs. Standalone Policy

Riders will have greater limits on policy face amounts than standalone juvenile policies. A rider might limit the face amount of the child policy to a maximum of $10,000 or less.

On the other hand, a standalone juvenile policy may offer simplified issue in amounts up to $75,000. Simplified issue means no medical exams are required. If the intention is to build cash value for college or other young adult expenses, standalone policies in amounts exceeding the lower rider limits would be more desirable.

Childhood Illness

Loans for College or Other Expenses

Permanent policies such as whole life and universal build cash value that can be borrowed tax-free for college funds, weddings, or other young adult expenses. Some policies do not require these loans to be repaid, although not doing so can reduce the death benefit and may also cause the policy to lapse if the unpaid loan eventually exceeds the ongoing premium requirements.

Financial Net Worth

At the age of majority, provided the policy continues in force and is converted to the now adult child, the cash value accumulated in a permanent life insurance policy becomes a part of their net worth. Assuming there are no offsetting liabilities, having a positive net worth at a young adult age sets a solid foundation for their financial future.

Term or Permanent Coverage

Of the companies that offer standalone policies for children, the coverage can be either term or permanent life insurance.

For instances where children are added to the policy as a rider, the coverage will always be term insurance. Once the child reaches a certain age in adulthood the child’s coverage will terminate. It is at this point that policy conversion benefits begin. The age of adulthood is not fixed between carriers. Quite often the age of adulthood is into the early twenties, but can be younger.

Policy Termination

If the parental or grandparental policy terminates, so will the child coverage on a rider. This can happen on the death of the parent or grandparent who was the insured. It can also happen if a policy lapses for nonpayment of the premium.

Depending on the circumstance, there may be the opportunity for the child to roll into another policy–for instance the policy of the surviving parent–without having to provide evidence of the child’s insurability.

Minuscule Cost

All parents want healthy children, and children are certainly not expected to precede their parents in death. However, a life insurance policy is an investment in a child’s future that can offer lifetime benefits for the child financially and as a guarantee of future insurability. The cost for child coverage is literally minuscule by any standard when compared to the protections put in place.