Do parents take out life insurance on their kids?


Editorial team Published on

Yes, some parents do buy life insurance for their children, though it is not as common or essential as life insurance for income-earning adults.

How It Works

  • Types of Policies: Parents usually buy a whole life insurance permanent policy or add a child term rider to their own adult policy.
  • Coverage Amount: Death benefits for kids are small, typically ranging from $5,000 to $50,000.
  • Cost: Premiums are low—often $3 to $55 per month—because children are young and generally healthy.

Why Parents Buy It

  • Guaranteed Insurability: It protects a child's future ability to get coverage. If the child develops a serious health condition later in life, they keep the policy without being denied or paying higher rates.
  • End-of-Life Expenses: It helps pay for burial and medical costs if a tragedy occurs, and gives parents financial breathing room to take time off work.
  • Cash Value: Whole life policies build cash value over time. Ownership can transfer to the child when they reach adulthood (age 18 to 21) so they can use the funds for college or a down payment.

The Drawbacks

  • Not for Income Replacement: Kids do not earn an income or support the family financially, so coverage is not strictly necessary for basic household survival.
  • Low Financial Return: Financial experts on Reddit point out that standard savings or investment tools—such as 529 college plans or custodial accounts—often offer much better financial growth and flexibility than child life insurance.