Life insurance for kids

Is life insurance for a child worth it?

It can be an extremely valuable gift for your child or grandchild. Here are some reasons to buy life insurance for a child:

1. Life insurance can last a lifetime

As long as the premiums continue to be paid, the life insurance policy purchased for your child will provide death benefit protection for the child’s entire lifetime. In adulthood, your child will be able to use the policy to protect his or her own family.

2. It won’t wear out or fall apart

A life insurance policy purchased for your kids or grandkids today will still be there and increasing in value years from now if policy premiums continue to be paid. That’s something conventional gifts don't offer.

3. Life insurance for children has accumulation potential

Most gifts lose value over time, but a whole life insurance policy accumulates cash value each year. That cash value can be used for things such as a down payment on a home, paying for college, funding a business opportunity, or helping to provide a comfortable retirement as the insurance needs decrease.*

4. It has tax advantages¹

Under current law, cash value that accumulates in a life insurance policy is tax-deferred. Even when the cash value is accessed, there are no tax consequences in most instances. Also, the death benefit that is received by beneficiaries is not taxable. Speak with your tax advisor for more details.

5. Lower premium rates for insuring a child

Life insurance premiums generally increase with age. With whole life insurance for kids, however, it’s possible to lock in the premiums at the child’s current age, so premiums will be unusually low for the child’s entire life.²

6. It can help guarantee future insurability

Once the policy has been issued, coverage cannot be canceled as long as all required premiums are paid. Also, if a Policy Purchase Option (PPO) Rider3 is included with the policy, your child has the right to purchase additional coverage at designated dates, regardless of your child’s insurability when those dates are reached. Certain limitations will apply.

What is child life insurance?

Child life insurance is whole life insurance that’s specifically for a minor. Its premiums are lower than premiums for a comparable adult policy. The policy is generally owned by the purchasing adult until the child reaches the age of majority as defined by state law. 

How does child life insurance work?

When a minor child or grandchild is insured, the policyholder is generally the purchasing adult, the beneficiary is generally a parent or guardian, and the insured is the child. When the child reaches the age of majority, as defined by state law, ownership of the policy can be transferred to the child. At that point, the child can select the beneficiary.**

Choose how to pay your premiums

When it comes to premiums, you can gift funds to your child or grandchild. That money can then be used to purchase a single-premium life insurance policy—for the same amount as your gift. With such a policy, no further premiums are required. But you can also select a whole life policy for a child with regular premium payments and make the premium payments on behalf of the child.**

Life insurance for grandchildren

When a child is given the gift of life insurance, it often comes from grandparents. A gift that will last the child’s entire life has particular appeal since it enables grandparents to be with their grandchild in spirit through the most meaningful times in the grandchild’s life—marriage, purchase of a home, the birth of a child—even if they cannot be there in person.

Should I buy life insurance for my child?

A life insurance policy makes a wonderful gift since it can be with the child for a lifetime. Make sure you thoroughly understand the ins and outs of the policy before you make the purchase, though. If the policy lapses because you stop paying the premiums or because the person you expected to pay the premiums doesn’t, the money may go to waste. A New York Life agent will be happy to help you identify the right policy for your child and make sure the policy you purchase can be kept in place for the long term.

Is children’s term life insurance an option?

Since term life is a good option for adults, it’s natural to wonder if it might be a good option for children. In most instances, though, it is not. A whole life policy is a valuable gift for a child because it locks in low premiums for a lifetime, guarantees the child’s insurability, and builds cash value. Term life does none of this. It locks in premiums for the term only. It doesn’t guarantee long-term insurability. And it doesn’t build cash value. Because children’s term life insurance rarely makes sense, insurance companies don’t offer it. But some companies do offer parents with term policies a child term rider. The rider gives the covered child a modest term policy that will cover funeral and burial costs.

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*Accessing cash value will reduce the death benefit and available cash surrender value. 

**There may be tax consequences associated with monetary gifts. Neither New York Life Insurance Company nor its agents provide tax, legal, or accounting advice. Consult with your own tax professional for information regarding tax implications for gifting to a child. 

¹There may be tax implications for policies recognized as modified endowment contracts (MECs), or if you partially surrender a policy in which the surrender exceeds the cost basis of the policy. Distributions, including loans from an MEC, are taxable to the extent of the gain in a policy and may also be subject to a 10% additional tax if the owner is under the age of 59½.

²The guarantees of a whole life policy are based on the claims-paying ability of the issuer. 

³The new policy must have a face amount of at least $25,000, and the charges for the PPO Rider will vary based on the payer’s risk class and the face amount.

The policy form number for the New York Life Whole Life Series of products is ICC18217-50P (4/18). The policy form number for the Purchase Protection Option Rider is ICC17217-413R.  RU 1891271