Should You Buy Life Insurance for Children?

In response to my life insurance post, a reader emailed to ask whether I’d recommend life insurance for children. In general, no.

When my husband was a baby, his mom bought a Gerber children’s life insurance plan to cover funeral expenses if he died. He continued to pay for this $10,000 coverage well into his late-twenties, until I pointed out that he’d probably paid more than it was worth. He was able to cash it in and get a little money, but not much.

Why Buy Life Insurance for Children?

There are two main instances when you might want to buy life insurance for your kids:

  • Your child contributes income to the family. This is a pretty rare occurrence, but it’s a possibility, especially for child actors, models, and other performers. In this case, you might consider buying insurance to replace your child’s income if you have no other sources of support and are a full-time stage parent.
  • You have a strong family history of diseases that make acquiring insurance later difficult. Examples would be Type 1 diabetes and other debilitating, lifelong illnesses. If you buy your kids whole life insurance when they’re young, you guarantee them coverage later in life, as long as you or they continue to make the payments.

Preparing for Funeral Expenses
Unless either of the above applies to you, there’s no reason to buy your child a life insurance policy. If you’re worried about funeral costs, deposit the premium amount into a college savings plan of some kind. You can still access the money if the unthinkable happens, but your child will have additional money for college if it doesn’t.

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