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Life Insurance for Children: What You Need to Know

Let’s face it: Thinking about the death of your child is almost more than you can bear. But you’ve seen those sweet baby-faced commercials urging you to buy life insurance for your child, and you wonder whether it’s a good idea. After all, you’d do anything for your kids.

So, what’s the right thing to do? Here’s the honest truth: Getting life insurance for your kids is not the best option for your family. We’ll explain all the choices without any emotional hype so you can make an informed decision.

What Is Child Life Insurance?

Child life insurance is an insurance policy you buy to replace your child’s income in the sad event that they pass away. But wait a minute—who ever heard of a child with an income? Even if you have a budding entrepreneur for a son or daughter (and we hope you do), it’s not likely you’re depending on their income for your own livelihood. So where is this concept of insuring your child’s life even coming from?

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Frankly it’s marketing hype aimed at selling you something neither you nor your child really need. The only legit purpose of a life insurance policy is to replace your income—or your spouse’s—in the event of a breadwinner’s untimely death. The whole point of this kind of policy is to guarantee that those who are depending on you financially don’t have to have money problems on top of losing a loved one.

Basically, having life insurance for a child takes a great idea like life insurance and combines it with something totally unrelated. The marketing around child life insurance relies on several myths, and we’re going to bust all of them below.

Is Life Insurance for a Child Worth It?

Absolutely not. There is no financial advantage for you or your child to get them a life insurance policy of their own. There are three main myths about life insurance for kids that keep this gimmick alive, but each one can be pretty easily exposed as false if you do some simple math and consider a few facts. The main myths are:

  • Life insurance for children is a great way to save for college. Nope.
  • This is a way to make sure they can have more life insurance in the future. False!
  • It’s the best way to cover the cost of a funeral. Fake news.

Why People Buy Life Insurance for Kids

If buying life insurance for kids is such a bad idea, why do so many people do it? For one, advertisers do a great job of pulling at your heartstrings to make you think it’s the best thing since home delivery for your groceries. Let’s take a closer look at the specific myths people believe about life insurance for kids. This is what you’ll hear:

Myth #1: It provides a savings vehicle for my child’s education.

You’ve probably seen this as a feature of whole life insurance for children. The idea is that the monthly premium will build up savings for college. Sounds great, right? Not so fast.

First, the fees will eat away at your return. And the return isn’t great—about as much as a traditional CD (certificate of deposit) you’d get at a bank. Not only that, but you’ll also have to pay fees to get your money when it’s time to pay tuition. In what world is this a good idea? Not the real world—that’s for sure.

Myth #2: It guarantees my child can get more life insurance later.

Some parents and grandparents want to make sure their kids can get good life insurance even if the kids develop a medical problem early on.

The truth is, most people in their 20s and 30s have no problem getting a good term life insurance policy, so there’s really no need to buy life insurance for your kids.

If you do buy life insurance for your kids and they want to carry their policy into adulthood, they can only get a limited amount added to it. And in many cases, that amount is too small to provide for their family long term.

Myth #3: It covers funeral expenses and other costs.

Yes, life insurance would cover funeral expenses, but the likelihood of actually needing it is so slim that you’re better off putting the monthly premium payments into a savings account. Then you retain control of that money and can use it for other reasons, like if your child needs their tonsils taken out. And that type of emergency is much more likely to happen!

Alternatives to Children’s Life Insurance

If you don’t buy life insurance for your child, how do you pay for burial expenses if the unthinkable happens? We’ve got an easy fix. Instead of paying premiums, you can put that money in an emergency fund. If you stash away three to six months of living expenses, you can cover the cost of a funeral—or any other emergency that might pop up along the way.

If you don’t have that money stashed away yet, you can get a rider for your children on your term life policy (or your spouse’s). A rider is an add-on to a basic policy. Think of it like adding bells and whistles to your car.

This kind of rider is pretty cheap—around $50–60 a year—and it covers all your kids, no matter how many you have, until they are no longer a member of your household (that’s what Dave did for years).  

Do You Need Life Insurance for Your Child?

The reason you buy life insurance is simple: It replaces your income if you pass away and helps your family take care of their financial needs when they can no longer rely on your income. But since you don’t depend on your child’s paycheck (they depend on yours!), there’s no need to buy a policy for your kids. It’s easier and cheaper to get a rider on your own term life policy.

Here’s the deal: You love your children and want to start them out on the path to success, but getting a life policy on them is the wrong road. If you’re in the market for new life insurance for yourself or your spouse, we recommend RamseyTrusted provider Zander Insurance to get it done. That way, if the unthinkable happens and one of you passes away, you know the policy will replace your income and put your kids in the best spot possible.

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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