Life insurance riders allow you to increase the coverage or death benefit provided by your policy. If you have children, you may want to consider adding a child rider. Child Rider Life Insurance Addition pays a death benefit if the covered child dies while your policy is in force. Like other insurance riders, there are some pros and cons to consider when deciding whether or not you need this type of coverage.
To help decide whether this specific rider is right for you, consider finding a financial advisor.
What is a child rider for life insurance?
Child riders, also called child insurance riders or child term riders, allow you to extend a term life insurance policy that you have taken out to cover yourself or your spouse. This type of rider covers all your children as well as any of your children in future.
If your child dies, the child rider of your policy will allow you to collect the death benefit. You can then use this money to cover funeral and burial expenses or other costs. Depending on the structure of your policy, a child rider may be convertible to permanent life insurance coverage.
How child rider life insurance works
Usually, when you buy a new life insurance policy, you are given the option of buying a child rider. Some insurance companies may allow you to add a child rider to an existing policy, although this is not always the case.
Most child riders work by covering children from infancy to age 18, although some policies may extend coverage until the child’s 25th birthday. You pay an additional premium for the rider that covers all your children. The cost varies depending on the insurer, but it can be as low as $5 per month, depending on the size of the death benefit.
The insurance company may require you to be within a certain age limit to qualify for the child rider for life insurance. For example, you must be at least 20 but under 55 to qualify. You may need to answer a health questionnaire about your children, although a medical exam is usually not required. Keep in mind that pre-existing conditions may not be covered.
Your rider will allow you to receive the death benefit if your child dies within the covered age window. The death benefit amount is determined by the terms of the rider, but $10,000 is a normal coverage amount. Income from child rider is paid in lump sum and is generally tax free.
In the event that you never need to use the death benefit, your child may have the option of converting a term rider to permanent life insurance for himself. The policy will remain active till the premium is paid.
Who needs a child rider for life insurance?
If you want to increase your coverage in the worst case scenario then you can consider buying a child rider for your life insurance policy. The loss of a child can be emotionally devastating and a child rider can ease some of the financial burden of paying for funeral or burial arrangements.
Child riders cover your children based on their health condition at the time of purchasing the policy. So if they later develop a life-threatening condition, you already have this coverage. You can also consider a child rider if you want your child to be able to convert it into permanent life insurance later.
Convertibility can be an attractive feature of child riders as they ensure that you get some value out of the coverage. Ideally, you never have to use the rider’s death benefit. And if your child can change the policy later, the premium you have paid till that time is not wasted.
Child Term Rider Vs Child Term Life Insurance Vs Child Whole Life Insurance
Child term rider is a way to buy life insurance for your children. But you can also choose a standalone term life or whole life insurance policy for children.
Term life insurance covers your child for a specified time period. You pay the premium and if something happens to your child, you will receive the death benefit. For example, you can choose $10,000, $20,000 or $30,000 as the death benefit. If you never need to use the coverage, the policy will terminate after the term ends.
Whole life insurance policies for children also provide a death benefit for the child covered. This benefit can range from $5,000 to $50,000, depending on the policy. It is permanent life insurance that covers your child till the premiums are paid. The younger your child is when you buy coverage, the lower the premium.
One of the main selling points of whole life insurance for children is the cash value component. Child life insurance can accumulate cash value over time as you pay premiums. Your child can later borrow on that cash value or withdraw it from the policy. Or, they can continue to pay premiums as adults, allowing the cash value to continue to grow. Term life policies do not accumulate cash value.
If you have just one child to cover, you can choose term life insurance or whole life insurance. Whole life can be attractive if you are interested in giving your child lifetime coverage with the potential to grow cash value. A child term rider, on the other hand, may offer blanket coverage for multiple children. There is no cash value but it can be a cheaper option than buying one or more standalone policies.
A child rider for life insurance may make sense in certain situations, but it is important to understand what you are getting for the money. Researching the death benefit amount, coverage limits or restrictions, premiums and whether the rider is convertible later can help you decide whether a child term rider is right for you.
Insurance Planning Tips
- If you are buying life insurance for the first time, it is important to understand how much coverage you may need and what type of policy might work best. Term life and permanent life insurance may offer a similar range of death benefit amounts, however, where premiums are concerned, term life tends to be cheaper. The younger you are and the healthier you are when purchasing any type of life insurance, the less likely you are to pay. Permanent life insurance can also provide an opportunity to accumulate cash value over time.
- Apart from child riders, you can also consider other types of riders like accelerated death benefit or guaranteed return of premium rider. While some life insurance riders can be added for free, others require you to pay an additional premium. Getting quotes for life insurance online can help you estimate your costs.
- Consider talking to your financial advisor about the pros and cons of choosing a child rider for life insurance and whether it may or may not be what you need. Finding a qualified financial advisor should not be difficult. SmartAsset’s free tool matches you with three financial advisors who serve your area, and you can interview your advisor matches to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, start now.
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Rebecca Lake Rebecca Lake is a retirement, investment and estate planning expert who has been writing about personal finance for over a decade. His expertise in the finance sector also extends to home buying, credit cards, banking and small business. He has worked directly with several major financial and insurance brands including Citibank, Discover and AIG, and his writing has appeared online in US News & World Report, CreditCards.com, and Investopedia. Rebecca is a graduate of the University of South Carolina and also attended Charleston Southern University as a graduate student. Originally from Central Virginia, she now lives on the North Carolina coast with her two children.