Years ago, when my children were young, my in-laws took out life insurance policies for each of them. Honestly, I was a little freaked out by this and wondered how they could even imagine anything happening to my boys. The fact that they were older and wiser eventually became apparent. But more on that in a moment.
What is a Term Child Rider?
When you buy term life insurance for yourself, you will usually have the option of adding riders. Any endorsement adds benefits to your existing life insurance policy, providing additional coverage. In the case of a child term insurance rider, it provides coverage in the event of the death of a child.
The additional coverage you purchase is called “units”, with each unit equaling $1,000 of coverage. So if you were to buy 10 units, you would have a rider with $10,000 coverage. Generally, a term child rider must be purchased before the child turns 17. How long the rider stays active depends on the insurance company, as each has its own limits, but must end by the time the child reaches their mid-twenties. .
While there’s nothing worse than the thought of losing a child, there are several ways a child life insurance rider can benefit your children.
1. Coverage to early adulthood
Suppose a child rider remains in effect until the child’s 25th birthday. At this stage, the child is probably finding his bearings as an adult, finishing his studies or starting to build a career. This is the time in life when a person is least likely to have enough money to purchase a separate policy. If your policy endorsement keeps them covered until they can afford a new policy, that’s pure benefit.
This is where the wisdom of my in-laws comes in. I didn’t know at the time that the policies they bought for our boys were convertible, meaning they could be converted to a permanent policy when the original policy was due to expire. Our two children were in college until their twenties. While they were both healthy, that’s not true for everyone.
Converting a child rider to a permanent policy requires little or no underwriting, meaning they don’t have to pass a medical exam to qualify. What if one of the children develops a serious illness that makes it harder to get life insurance? Thanks to the policy taken out by their grandparents, they did not have to worry about it.
3. Already in the insurance habit
According to Savings Bank Life Insurance (SBLI), most people don’t start thinking about life insurance until they are 30 years old. By then, they get married, have children of their own, start a business and take out a mortgage.
By offering your child life insurance, it is always part of their life. There’s a better chance they won’t go a decade or more without coverage because it’s so readily available to them. Of course, there’s no guarantee your child will convert their childhood blanket, but it’s more likely to happen given how simple the process is.
Cost of a child life rider
The average annual cost of a $10,000 children’s life insurance rider is about $50. It’s just over $4 a month. Even better, one rider covers all the children in your family. Coverage for six children costs the same as coverage for one. This means that when one of them “ages” they each have the same opportunity to switch to an adult policy without having to pass a medical examination.
Questions to ask
Every insurance company is different, so before adding a child rider, be sure to ask for the following:
- At what age does the cover expire?
- Can a child lose eligibility at any time (for example, if they marry young)?
- What are my coverage options (what is the maximum amount I can buy)?
- If my child decides to convert their coverage, what is the maximum amount they can convert?
If adding a child rider fits your family’s budget, this is a great way to provide coverage for your children until they are financially able to purchase their own.
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