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Choosing Life Insurance

Why Buy Whole Life Insurance for a Child?


Is whole life insurance a good investment for a child? Yes, and here’s why: a whole life insurance policy offers long-term value, even if the policy isn’t used for the life insurance benefit. In fact, it can be a way to guarantee your child has adequate resources and financial security as an adult.

Read on to learn why buying whole life insurance for a child is a venture worth pursuing.

Why Buy Life Insurance for My Child?

Whole life insurance is a good investment for a child because of the long-term value it creates and benefits it provides. Below, we break down what exactly those benefits are, and what they mean for your child.

Guaranteed Insurability

By insuring the child while they’re young and healthy, you solidify their insurability for the rest of their life — regardless of what may happen to them. For example, if they experience health issues or take up a dangerous hobby as an adult, they could be denied on a new life insurance application. With a whole life policy, your child won’t have to worry about being denied coverage later in life. This is especially important if any genetic health problems run in your family.

Locked in Premium

Generally speaking, your child is going to be cheaper to insure now than they will be in the future. Even if the child grows up to live a safe and healthy lifestyle, the age of a person at the time of coverage does impact premium rates. Typically, young people are just cheaper to insure.

Secure Stable Financial Future

Whole life policies build cash value tax-free over time. Additionally, your child can borrow against the accrued cash value of the policy at favorable rates or surrender policies in whole to help pay for their education or any other life needs, like a down payment on a house or a car. Whatever your needs, there is a policy built for you, but it’s always important to read the terms and conditions of any policy before purchase.

Pros and Cons of Buying Life Insurance for Children

Now that you know why buying whole life insurance for a child is a sensible move, it’s important to weigh the pros and cons. Doing so will help you determine if purchasing this policy is the right decision for you and your child.

To help you make your decision, here are some of the pros and cons. Keep in mind that this information is based on the average whole life policy for a child, and some policies may differ.

Pros of Childrens’ Life Insurance

  • Guarantees future insurability, regardless of health.
  • Locks in low rates for the entirety of your child’s life.
  • Builds cash value tax-free
  • Cash value can be borrowed or redeemed to use however you want.
  • Tax-free benefit for survivors covers costs if the worst happens.
  • Eliminates worries over future medical examinations.

Cons of Childrens’ Life Insurance

  • Policy gains withdrawn may generate tax consequences.
  • The rate of return may be less favorable than other financial vehicles of similar risk.
  • You must commit to a long-term payment.

Can I Buy Life Insurance for My Kids?

The simple answer is yes, you can buy life insurance for your children. Some insurers sell small term life insurance policies for children that usually last until the child is an adult. These policies are most often put in place as a safety net so parents can pay final expenses in the unlikely event that their child should pass away. Whole life insurance, on the other hand, is permanent life insurance, meaning it lasts for the insured person’s entire life and comes with many additional benefits beyond a life insurance payout. Another alternative to a separate policy for your kids, may to add a child-term life insurance rider to your own term life insurance policy. Some child riders are convertible to permanent life insurance once the term ends.

With an adult insurance policy, the policyholder is normally the person who is covered by the policy. A policy for a child is a little different: The child is insured, but their parent or legal guardian is the policyholder. They can also be the policy beneficiary. You typically transfer ownership to your child when they become an adult.

How Much Does a Whole Life Insurance Policy for a Child Cost?

Much like adult life insurance products, the younger the child is at the time of the policy issuance, the lower the premium will be. The great thing is the premiums will continue to remain low for the child’s entire life, which is why whole life insurance is a good investment for a child’s future.

Premiums for children’s life insurance will also be based on how much coverage you buy. Most whole life policies have premiums that you pay monthly for life. However, if you are interested in “paying up” your child’s life insurance policy — meaning you satisfy all of the premium payment requirements after a specific number of payments — you can find policies with payment structures between 7 and 30 years.

After that time, no further premium payments are required; however, the policy remains in force and the value continues to grow for the rest of the insured child’s life. The shorter the time frame you choose to pay, the higher the premium will be. The benefit of this is that once the policy is paid, your child has it for life and never has to worry about the premiums.

While a low price is a good incentive to buy children’s life insurance, it is wise to consider the policy’s return on investment, in addition to the amount of the premium. A policy illustration will show you how much cash value the policy could earn over time, and it will also show the internal fees. For many, a whole life policy is a great gift for a child and can provide a foundation for financial success that benefits them throughout their life.

Learn More from AAFMAA

Whole life insurance is a good investment for a child’s finances and insurability later in life. To learn more about buying life insurance policies for your children, like AAFMAA’s Generations Plus Plan, contact us online or by phone at 866-631-1319. Our team of licensed military life insurance professionals will offer you guidance and a free quote.