The most important question to consider when you’re looking at buying a life insurance policy for a child is “why?” What is it that you’re hoping to accomplish? Life insurance is designed to provide peace of mind, and to provide a monetary settlement if someone passes away.

When life insurance makes sense

For an adult that’s the primary breadwinner in the family, life insurance makes total sense. That parent is the main source of financial security for their spouse and kids, and if they aren’t around then their spouse and kids are going to have a rough time of it.

Life insurance also makes sense for a stay-at-home spouse. If a father usually watches his small children all day and he passes away, the mom is going to have to start paying a sitter. There is, again, a financial impact to the person’s death.

However, in most cases, children don’t supply a financial component to a family. They aren’t a part of the income of the family, and if they pass away the family doesn’t make less money.

Proponents of children’s life insurance would make the argument that there are life insurance policies that accrue a cash value, and that these kinds of life insurance policies can make sense for a child because one day the child will be able to borrow against that cash value or even cash in the policy.

Life insurance isn’t an investment

The problem with this line of argument is that a whole life policy is usually not as good an investment as other options. You can make other investments in your child’s future without paying the whole life insurance premiums. In fact, whole life insurance rarely makes sense at all. Term life insurance is almost always a better choice, no matter what your age. There are other savings plans, such as 529 plans, that will let you set aside money for your child to use to go to college.

Most consumers recognize that children’s life insurance policies aren’t a good investment. Only about 15 percent of children under the age of 18 have insurance. For children that are covered, the amounts are usually pretty small.

There is one area in which it’s useful to have a small amount of children’s insurance, and that’s for burial expenses. In some cases, however, you can get your insurance company to add a small rider to your own insurance policy to cover just that kind of unfortunate expense.

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