🧒 What Is Child Life Insurance?
- A life insurance policy purchased on the life of a minor (usually newborn to age 17).
- The parent/guardian is the policy owner and pays the premiums.
- The child is the insured.
- These are typically whole life insurance policies (not term), meaning they last the child’s entire life as long as premiums are paid.
🔑 Key Features
- Death benefit: Provides a payout if the child passes away (often $10,000–$50,000).
- Cash value: The policy accumulates a savings-like component over time that can be borrowed against later.
- Guaranteed insurability: Some policies allow the child to buy more coverage as an adult, even if they develop health conditions.
âś… Pros
- Helps with final expenses in the tragic event of a child’s death.
- Locks in low premiums for life since purchased at a young age.
- Builds cash value that could be used for college, emergencies, or later in adulthood.
- May secure future insurability, useful if the child later develops chronic illness.
❌ Cons
- Death of a child is rare, so many families never “use” the policy.
- The cash value grows slowly compared to other savings vehicles (like 529 plans or investment accounts).
- Premiums could be better used for:
- A parent’s life insurance policy (since loss of a parent is a greater financial risk to a family).
- College savings or investments.
đź’ˇ Alternatives to Consider
- Term life insurance for parents: Much higher coverage at a lower cost, protects family income if a parent passes away.
- College savings (529 plan): Tax-advantaged way to save for a child’s education.
- Custodial accounts (UGMA/UTMA): Savings/investment accounts in a child’s name, flexible for expenses.
đź“Ś When Child Life Insurance Might Make Sense
- You want to lock in coverage for a child with a family history of health issues.
- You like the idea of giving your child a financial asset they can use later in life.
- You want to cover funeral/final costs (though rare, some families find peace of mind in this).
âś… Bottom Line: For most families, prioritizing parental life insurance + education savings is the smarter move. Child life insurance is more of a supplementary financial tool than a necessity.