Life insurance isn’t just important for individuals. It’s a tool for keeping your whole family stable in case of a death in the family. Creating a life insurance plan for your whole family, including your children, helps make each dollar of your premiums count.
We’ve got the low-down on how children and family life insurance works, and how to make it work for you. When you’re ready to shop, our expert independent insurance agents are here to answer questions and help you compare quotes to get the most bang for your buck.
Life insurance doesn’t fix the grief and pain of losing a loved one, but it can buy you the time and comfort you need to mourn in peace. Life insurance money is there to cover things like:
Life insurance is especially important for replacing lost income and paying down debts. Taking out extra life insurance on a higher-earning partner or spouse helps protect the other half of the couple. For a single parent, taking out life insurance is even more important to protect their children’s financial future.
Life insurance also ensures that your family can honor your cremation or burial wishes. Funeral costs increased by nearly 1,000% between 1960 and 2006, and they’re only creeping higher:
Considering that over three-quarters of Americans making under $100,000 a year have less than $5,000 in their savings account, it’s easy to see how insurance makes planning a funeral significantly less difficult and painful.
The right kind of life insurance for your family will depend on your income, debts, funeral wishes and the ages of any children or other dependents. The only wrong kind of life insurance is no life insurance.
Many insurance companies offer life insurance programs designed specifically for children. When you buy life insurance for a child, lost income and debt payments aren’t a concern. Instead, children’s life insurance is designed to cover funeral expenses and related expenses around a child’s death.
Life insurance for children is very cheap, usually $20 to $30 per year (or even less). It can usually be bought as soon as a child is one year old, and sometimes even earlier.
The sooner you buy life insurance for your child, the cheaper and more effective it will be. If your child becomes sick or seriously injured, it’s unlikely they’ll be able to get life insurance, so buying life insurance while they’re very young helps to guarantee coverage.
Common denominations for children’s life insurance policies are $10,000, $15,000 and $25,000.
When buying children’s life insurance, think about what would make a tragedy easier for your family to bear. Time off of work is one option. Life insurance can help you afford to take more time off once paid time off or bereavement leave runs out.
Some families may also wish to take a vacation or do another commemorative activity to help surviving family bond and heal. Life insurance can help pay for this.
Another benefit of children’s life insurance is that it can be continued into adulthood, saving your child money and time when they're ready to manage their own coverage. If young adults choose to continue their life insurance, they’ll often get coverage at discounted rates and potentially get to skip the medical exam.
Some children's insurance policies can also be converted into a lump sum savings account once the child turns 18. This can be used to help pay for college or other big expenses.
It depends on what you want the life insurance to cover. Many families would benefit from having both term life and whole life insurance policies. First, let’s break down common types of life insurance products:
Some families might choose a blend of two or more of these options, while others will be fine with just one.
Start by writing out a list of all the expenses your income currently covers. If you have a spouse or partner, have them write out their own list, too. Don’t forget to include:
Next, write out a list of expenses you’re anticipating in coming years: Kids heading to college? A dream home or vacation home? An aging parent who needs care? Estimate those costs as best you can.
Finally, write out a list of expenses that are likely to arise if you or any other family member, including a child, passes away. This includes:
Once you have an idea of how much all those things might cost, it’s time to think about short-term expenses vs. long-term or permanent expenses.
An independent insurance agent can answer questions and help you find the right blend of coverage for you.
All of this information makes up your family’s insurance plan. Keep updating it whenever you have a major life change. With it, you’ll always have the peace of mind that comes from knowing your family will have the resources to survive a tragedy.
Many employers offer life insurance as part of their benefits package. You may get it for free, or you may need to chip in some of your own money. These life insurance policies have their perks, but you’re almost always better off shopping for additional life insurance on your own. You may even want to skip employer-provided coverage altogether.
That’s because these policies are often more expensive than their non-workplace counterparts. It comes down to pooled risk: When you buy into employer-provided life insurance, you’re usually paying for the risks of all the employees at your workplace, not just your own risks.
This works in your favor if you’re older (especially if you’re over 40) or have preexisting health problems, since those things can drive up the cost of individual life insurance significantly. But if you’re young and healthy, it’ll end up costing you more.
Employer-provided life insurance generally only lasts as long as you're employed. This is a problem because the price of life insurance increases steeply as you age.
If you choose the employer-provided option in your 20s or 30s, and move on to a new company in your 30s or 40s, you won’t be able to continue your cheaper coverage. You’ll need to pay a higher rate based on your current age, when you probably could have locked down a cheaper permanent rate if you’d purchased the life insurance yourself.
A few employer-provided life insurance policies do allow you to transfer ownership of the life insurance policy to yourself when you switch employers, but they usually charge a hefty fee to do this. Their premiums tend to be higher and the benefit amount lower than the coverage you can buy yourself through an independent insurance agent.
Employer-provided policies can make for great supplemental coverage, especially when you’re in your 40s and older, when normal life insurance can get prohibitively expensive. But it’s almost always a bad idea to put all your eggs in that basket.
You can start by talking to an independent insurance agent. Independent agents work for you, not insurance companies. They can find the true right price for you, not just the best price one company offers. If you get stuck while putting together your family’s life insurance plan, they can answer questions and help you prioritize.
An independent insurance agent can help you buy life insurance for every member of your family, including your children. Sometimes children’s life insurance is bought by extended family members, like grandparents. If this is the case, your independent insurance agent can help you integrate this generous gift into the rest of your life insurance plan.
Life insurance often requires a medical exam. Be honest while preparing for and during the exam: A lie or deliberate omission can invalidate your life insurance policy. If you’re confused about any requirements, your independent insurance agent can help walk you through it. They provide the personal touch in a situation that can feel stressful and ghoulish.
An independent insurance agent will round up quotes from different insurance companies for you to compare. Don’t automatically go for the cheapest option. Instead, ask your agent what life insurance discounts have been applied and how much coverage each option provides.
Finally, one of the most important benefits of an independent life insurance agent happens after tragedy strikes. Your agent can serve as a go-between for you and the insurance company. They’ll help you and your loved ones get the life insurance benefit as quickly and smoothly as possible, so you can focus on grieving instead of hounding customer service.
Buying life insurance is tough. Navigating it alone makes it tougher. We wish you and your family the best. And remember, the only wrong way to handle your life insurance is not to think about it until it’s too late. You’re here, so you’re doing something right!