What Is Life Insurance?
Life insurance, in the form of a policy issued by an insurance company, promises to pay a specified amount to a designated beneficiary upon the death of the insured. This policy is paid for usually monthly or annually based on a predetermined rate, or schedule, and is called an insurance premium.
There are generally two kinds of life insurance: term and whole life. Term has a fixed premium and lasts for a certain number of years. If the insured doesn’t die and the term expires, the premiums paid are not refundable. Whole life generally adds cash value that you can benefit from during your lifetime and lasts as long as the premium is paid. A portion of the whole life premium is set aside and over time, accrues a cash value that can be claimed by the beneficiary under certain circumstances even if there is no death.
Life Insurance generally exists to provide funds to pay for the funeral and burial, bereavement time away from work, travel, and other costs incidental to the death of the insured as well as to fill the void in income provided by the deceased, as in a parent who provides financially for their family.
Should I Buy Life Insurance for My Children?
As a financial investment, children’s life insurance is not always a necessary choice because child mortality rates are so low and the whole life policies offered usually have a poor rate of return. If peace of mind is important to you, and the cost of funeral and burial may be hard to afford, then the most cost-efficient option—a simple term rider for $10,000 to $30,000 attached to the parent’s life insurance policy—should suffice for this instance and at rates of around $50 per year for all children in the family (as available with State Farm), this solution is hard to beat.
Children’s life insurance is easy to get, with few questions asked and no requirement for a physical. For children with health problems, who may be uninsurable as adults, or who enter professions that are uninsurable, children’s life insurance is incredibly important because after the policy is written there will never be a requirement to provide proof of insurability again.
What Does Life Insurance for Children Cost?
Generally, children’s life insurance is inexpensive. Here is a run-down of the typical costs:
Term: This is the least expensive insurance and typically only offers coverage of $10,000 to $20,000 per child. Term insurance is not a policy written in the name of a child, but is a rider to a parent’s life insurance policy that covers all children, even children born after the policy is initiated. For instance, the cost of a rider with State Farm is around $50 per year, regardless of the number of children in the family.
Whole Life: By comparison to a term-life insurance rider, whole life is more expensive, but compared to whole life insurance for an adult who initiates a policy at say, age 35 or 40, the cost is incredibly low. Whole life children’s policies generally offer coverages of $5,000 to $50,000 with some policies capping out lower and some higher. For a newborn in most states the cost for this range is about $30 to $200 per year, with the companies here as low as $2.17 per month.
Normally these policies require very little information beyond name, date of birth, sometimes gender, and the resident state. Usually, there are no questions about medical conditions and no physical or medical examinations required.
How We Chose the Best Life Insurance for Children
While many aspects of the whole life policies and the term riders are the same across insurers, there are differences that will draw you to one or a few insurers in particular versus others. We looked at about fifteen insurers and focused the criteria that matter most when shopping around for children’s life insurance, including the financial strength of the company, the cost of the plans offered, and the ease of applying for and initiating the policy.
After these common points, we called out aspects that were unique, such as:
1: The age for all insurers except one was two weeks to 17 years, but Globe Life Insurance is the only insurer that will write new policies for children ages 18 to 24.
2: All coverages are for a fixed amount that you select for the life of the policy, except Gerber Life who doubles the coverage automatically at no additional cost when the insured arrives at age 18.
3: Thrivent offers very low rates and is one of the most financially sound insurers, but will only write policies for Christians.