Purchasing life insurance policies for dependent children, or
grandchildren, can be a simple and effective way of planning for
intergenerational wealth transfer, creating prequalifying
opportunities for additional policy coverage in the future regardless
of health issues, and of course, as coverage for costs related to a
dependent child’s death.
Children’s life insurance is a broad term that refers to life
insurance policies where the insured is a minor and the policy owner
is an adult – usually the child’s parent or grandparent.
There are two ways to get children’s life insurance. The first is
through a term rider on your own life insurance policy. The second is
purchasing a separate, permanent policy for your child. A term rider
is generally less expensive, but it provides significantly less
coverage than an individual Whole Life or Universal Life insurance
policy for the dependent child. An individual policy also provides
greater options for coverage and future insurance eligibility with the
addition of a guaranteed insurability rider added to the policy at inception.
Children’s insurance can be structured to remain in force for the
covered child’s lifetime, including into adulthood. Whole Life &
Universal Life policies can build significant cash values over time.
Policy owners can access the available cash value for future
opportunities or to help pay for a life event - like buying a first house.
As with all insurance types, the benefits are accrued only if the
insurance premiums are paid. At the time of application, the length of
the premium-paying period can be selected. This can range from as few
as four years to the life of the insured child, depending on what best
suits the situation.
If you are interested in planning for your dependent child’s future
through children’s insurance or other financial tools, contact your
Wealth Advisor for more information and to help chart your course.