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Apr 8, 20225 min

Do Children Need Permanent Life Insurance?

Life insurance is for oldies, right? Think again. Not only should you get a life insurance policy in your younger years; you can also take out coverage for your children. And it’s as easy as ABC, 123, so put on an episode of Barney and find out everything you need to know about permanent life insurance for children with these top tips.

What is child life insurance?

Usually purchased by a parent or even a grandparent, child life insurance provides coverage to the life of a minor. These policies are typically offered as whole life products, which is a form of permanent life insurance.

Unlike a term policy, permanent life insurance lasts for the entirety of someone’s life–in this case, it would be the life of the child. It works just like an adult policy, covering the child for a specific amount for the child’s whole life, but at a very, very low cost that they get to keep for their entire life.

Now, we know life insurance is often thought of as a morbid subject. However, permanent life insurance comes with accessible benefits while you're still alive, such as wealth accumulation. But we'll dive deeper into that in a bit. With permanent life insurance for a child, the child is insured, but the parent, grandparent, or legal guardian can act as the policyholder and switch the ownership (and payments) over to the child later in life if they wish.

Why get permanent life insurance for my child?

None of us want to think about death. Fortunately, the death benefit aspect is only one portion of permanent life insurance, and you can use the policy as a form of investment account for your little ones. In fact, there are several benefits to permanent life insurance for a child:

Cash value accumulation

When you pay into a permanent life insurance policy, you're essentially paying into two pots: the death benefit and the cash value. Each of these grows over time, with the cash value accessible later in life. So if you're paying into the policy from your child's birth, you can build up a nice little sum of money by the time they're 18–just in time to pay for their college tuition. Don’t need cash for college? They can use it for a down payment on their first home, or keep it growing for a very comfortable retirement for themselves.

Long-term protection

A permanent life insurance policy lasts for as long as you keep paying into the premium, and those premiums are cheaper the younger you are. That means paying into permanent life insurance for a child offers long-term protection at a lower locked-in cost.

Guaranteed future insurability

Most permanent life insurance for a child offers a guaranteed purchase option. This allows you the right to buy a portion of the insurance at a locked-in health classification in the future. That means, even if your child develops a medical condition later in life or even chooses a risky career, their life insurance premium won't increase even though they technically become more of a liability to the life insurance provider.

How much does it cost?

The younger and healthier you are the lower your premiums. Therefore, permanent life insurance for a child can be significantly cheaper than it is for adults. For example, it can be $10-50 a month for permanent coverage around $250,000-$500,000. That is more than 1/10 that of a 20-year-old’s premium for that amount of permanent coverage!

That also means you’re paying the same premiums for a child at three months, five years, and 15 years, etcetera. The more coverage you get the slightly more expensive your premiums will be, but the more money you can save into your policy to keep it growing tax-free for your child’s nest egg later in life.

For more info on permanent life insurance costs for a child, why not check out the available policies and see if you can find coverage that’s right for you and your kids?

What else should I know about permanent life insurance?

Whether you’re taking out a permanent life insurance policy for you or your child, there are several benefits that sit nicely alongside the cash-value element. These include tax-free options and the ability to customize your policy with riders.


Unlike other savings accounts, a permanent life insurance policy is completely tax-free. That means you don't pay a penny to the IRS when it comes to withdrawing the cash value later in life. How does that work, you ask? When you withdraw cash, you essentially take it out as a 0% loan against yourself, that you never have to pay back. And because you can't pay yourself tax, there are no taxes to pay against it. Then, the accumulated death benefit pays off the loan when you pass, with whatever's leftover going to your loved ones.

Locked-in premiums

Again, permanent life insurance has locked-in premiums. You pay the same amount each month the entire time you have the coverage, and your death benefit and cash-value element continue growing throughout this entire time.

Helpful riders

A life insurance rider allows you to customize your plan with extras that could come in handy should certain scenarios arise. Some of these riders are included with premiums; others can be added for an extra cost. Popular life insurance riders include:

  • Child term rider
  • Guaranteed insurability rider
  • Accelerated death benefits
  • Long-term care rider
  • Waiver of premium rider
  • Term insurance rider
  • Return of premium rider

For more info on what these riders entail, as well as the benefits of adding riders, check out our article covering everything you need to know about life insurance riders.

In conclusion: Permanent life insurance for a child

Considering permanent life insurance for your child doesn't mean thinking about what happens if the worst occurred. Instead, you can look at it as a way to build wealth for them over time with the added benefit of being covered. When they're older, they'll likely thank you for giving them a cash-value element that can jump-start them financially later in life and keep their life insurance premiums low for the rest of their future as well.

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