What Is A Child Term Rider In Life Insurance?

As a parent, one of the most difficult considerations is the financial impact if the unimaginable occurred and you lost a child. While no sum of money can ever compensate for such a loss, incorporating a child rider into your life insurance policy can offer some financial relief.

By adding this policy rider to your life insurance, you can opt for a modest amount of death benefit coverage that would be paid out if one of your children were to pass away. This provides you with the assurance of having a financial cushion in place should you face the tragic loss of a child.

This guide will cover all the essential details about child riders on life insurance, helping you determine if this additional coverage is the right choice for your family

What Are Child Riders for Life Insurance?

A child rider is an additional feature to a life insurance policy that provides a specified amount of temporary life insurance coverage for all minor children in your household. It is attached to the parent’s primary policy, ensuring that if one of the insured children passes away, you receive a separate, tax-free death benefit payout.

Unlike individual life insurance policies for children, such as the Gerber Life Grow-Up Plan, a child term rider is connected to the parent’s or guardian’s policy, eliminating the need for separate applications for each child. This bundled coverage is usually more cost-effective than purchasing multiple individual child life insurance policies.

A single child term rider typically covers all biological children, stepchildren, and legally adopted children of the insured parent at one fixed rate. This can give you peace of mind, knowing there would be financial assistance available in the heartbreaking event of losing a son or daughter.

How Do Child Riders Work?

Incorporating a child term rider into your life insurance policy is typically done when initially purchasing your life insurance coverage. Although some insurers permit adding a child rider at a later time, this is less frequent.

To add life insurance coverage for your children as a rider to your policy, you’ll need to fill out a straightforward one-page supplemental form with basic details about your children. While children are not required to undergo a medical exam, most applications for a child rider will ask you to answer a few health-related questions about your children.

The child rider offers a fixed death benefit amount, such as $10,000 or $25,000, for each child covered in the unfortunate event of their death. Should an insured child pass away, you would file a claim in the same manner as with the base life insurance policy to receive the death benefit payment.

Due to children having significantly lower mortality rates than adults, adding a child life insurance rider to your policy is generally very affordable. Depending on the insurer, a $25,000 child term rider might cost an additional $50-100 per year. This modest extra premium could provide some financial support in the heartbreaking event of losing a child.

Types of Child Life Insurance

There are two main options for insuring the lives of children – child term riders or standalone child life insurance policies.

Feature	Child Term Rider	Child Whole Life Insurance
Type of Coverage	Temporary life insurance coverage linked to a parent’s policy.	Permanent, individual life insurance policy for each child.
Coverage Duration	Expires when the child reaches a certain age (usually between 18 and 25 years old).	Lifelong coverage with a guaranteed death benefit.
Premiums	Lower cost; added to the parent’s main policy premium.	Higher cost; fixed premiums for each child’s individual policy.
Coverage Amount	Typically limited (e.g., $10,000 to $25,000 per child).	Can be higher and varies based on the policy chosen.
Number of Children Covered	One rider can cover all children in the family, including future births or adoptions.	Each child requires a separate policy.
Cash Value	No cash value accumulation.	Accumulates cash value over time which can be borrowed against or used in the future.
Conversion Options	Often allows conversion to a permanent policy when the child reaches adulthood.	Not applicable as it is already a permanent policy.
Underwriting Process	Generally no separate underwriting for children; attaches to parent’s policy.	Requires individual underwriting for each child.
Purpose	Primarily to cover final expenses in case of a child’s untimely death.	Offers both death benefit and potential for cash value growth as a financial tool.
Flexibility	Limited flexibility; tied to the term of the parent’s policy.	High flexibility; policy remains with the child throughout their life.

Child Term Rider

A child term rider provides temporary life insurance coverage for all dependent minors linked to your adult life insurance policy. The key features include:

Term coverage expires once children reach a certain age, typically between 18 and 25 years old.
One rider covers all unmarried children, including future children born or adopted, while the policy and rider are active.
Convertible to a permanent life insurance policy when they reach the age at which they are not eligible to be a child rider.
Premium costs are added to the main policy and are less expensive than individual child policies.

Child Whole Life Insurance

In contrast, a children’s whole life insurance policy is a separate, permanent policy just for one child. The main characteristics include:

Lifelong coverage with guaranteed death benefit and fixed premiums.
Each child needs their own individual policy.
Features living benefits and cash value accumulation.
Death benefits may automatically increase when the child reaches a specific age.
Higher premium costs than child term riders.

Unless there is a specific need for your child to have permanent coverage, a child term rider is generally the most practical and affordable way to provide life insurance for your children.

Why Should You Buy a Child Rider?

Given the unimaginable worst-case scenario of losing a child, a child life insurance rider can ease some of the emotional and financial strain on a family. There are several compelling reasons to consider adding this supplementary coverage:

Affordable peace of mind: The cost is relatively low, especially considering the benefits. For less than the cost of a cup of coffee per month, wouldn’t some financial cushion to cover unexpected expenses help in a time of mourning?
All children covered: One rider covers all your kids, including future children born or adopted, while the policy and rider are active. No matter the number of children you ultimately have, the rate is fixed and not based on bundled coverage, which keeps costs down versus individual policies.
Continued insurability: If health conditions later arise, your children are guaranteed ongoing coverage under the child rider. Most child term riders even allow children to convert to permanent life insurance later in life.
Final expenses assistance: Though no amount of money could ever make up for the loss of a child, the benefit could help subsidize substantial hospital bills, funeral costs, or counseling without further financial strain.

Understanding The Life Insurance Child Term Rider

It’s beneficial to comprehend exactly what protection a child rider can provide, who is eligible, and how benefits are handled.

Tax Implications and Coverage

The death benefit payout from the child rider almost always qualifies for exclusion from federal taxes. This means the lump sum payment you would receive if faced with using this safeguard for your family would not count as taxable income.

For most policies, a child rider only applies to biological and legally adopted children. However, some insurers extend eligibility to stepchildren or grandchildren if a grandparent holds the policy and the life insurance company offers the policy rider.

Verify coverage specifics with your insurance provider or agent, as they can clarify what qualifies regarding children’s term insurance riders and any age limitations on grandchildren.

Conversion to Permanent Life Insurance

Depending on the insurance company and policy details, the child rider may include an option to convert to a permanent life insurance policy for each child as they reach adulthood, typically between 18 and 25 years old. This ensures ongoing coverage that does not expire even after they age out of the rider terms.

The conversion process allows children to get permanent insurance without new health underwriting, which could be more complicated or result in higher premium costs depending on emerging health conditions.

While term life insurance is generally the most practical, especially for young families, this conversion option guarantees insurability with the opportunity to increase the total face amount up to five times the amount the child received with the original rider.

Eligibility and Benefits

The eligibility requirements and benefits of child term riders can vary slightly across insurance companies, but they generally include:

Parent’s Age When Adding a Rider: Typically 18 to 65 years old.
Child’s Age Eligibility: Coverage usually starts as early as birth and continues until at least age 18.
Covered Dependents: Generally includes biological and legally adopted children.
Child’s Health Considerations: While many insurers do not require a medical exam for children, some may have health-related criteria or exclusions. It’s important to check with the insurer for any specific health requirements or limitations.

The benefits of adding the supplementary coverage for your children include:

Financial support if faced with a child’s death.
Affordable premium costs, often $100 or less annually.
All current and future children are covered with no added underwriting required.
Conversion possibility to permanent life insurance policy with opportunity to increase coverage.

Potential Drawbacks of Child Term Riders

Before deciding if this type of contingent coverage aligns with your family’s needs and budget, be aware of a few potential disadvantages:

Limited coverage amount: The death benefit typically max out at $25,000 per child, which may not fully cover all final expenses and ongoing costs for surviving family members.
Adds extra expense: Although an affordable way to provide coverage to multiple children under one policy, the extra rider still represents added insurance costs each year.
Age restrictions: Eligibility for coverage ends when children reach ages varying by policy from 18 to 25 years old.
Opportunity cost: Weigh the money going toward premiums against setting aside funds in other ways, such as college savings accounts.

For some families, these constraints could make a child rider less useful or harder to justify than other financial priorities. Carefully assessing the pros and cons allows you to make the optimal judgment.

Cost Considerations of a Child Term Rider

Since a child rider attaches to your life insurance policy and covers all your children, it is a fraction of what multiple child life insurance policies would cost. You can typically insure each child for $25,000 or more for less than $100 extra per year.

For example, a $10,000 term life insurance child rider may charge around $50-60 annually. In contrast, an equal amount of permanent, individual coverage could run 10 times as much. Even higher benefit amounts of $25,000 per child often stay under $100 yearly with a rider.

If you have three kids, buying separate child policies with $15,000 death benefits may charge over $500 per year. But adding a $15,000 rider could less than double your base policy premium. For pennies a day, wouldn’t some extra security make sense?

Decision Making

In deciding if protection for your children aligns with your family’s insurance priorities, weigh factors like affordability, the number of kids and their ages, whether you already have sufficient life insurance, and if you anticipate health changes.

If you have young children or intend to grow your family further, getting coverage through a child rider locks in insurability. By passing away the extra premium costs across years of eligibility per child through their late teens or mid-20s, the cumulative expense stays reasonable relative to permanent child policies or potentially paying funeral costs out of pocket.

Work through a break-even analysis comparing the rider premium totals paid over decades per child against projected unpaid funeral costs. Are you honestly better off investing monthly savings elsewhere, or would it be worse to wind up without this contingency in place?

What Happens When a Child Term Rider Expires?

Once the maximum age limit is reached, typically between 18 and 25 years depending on the policy terms, the child rider coverage ends for that child. This is different from whole life insurance, which provides lifelong protection. However, child riders are more affordable while your children are still financial dependents.

Many insurers offer an option, or sometimes a requirement, to convert the term rider to a permanent life insurance policy once it expires. This ensures continued coverage after the child outgrows the rider terms. Generally, insurers allow conversion to a death benefit up to five times the original amount of the child rider.

For instance, if you had a $10,000 term rider, it could be converted to as much as $50,000 in whole life insurance for each child. It’s important to review the specifics with your insurance provider to understand the conversion options, costs, and age limits for your policy’s child rider terms.

Conclusion

Losing a son or daughter is an unimaginable fear for any parent. While nothing can truly compensate for such a profound loss, a child rider on your life insurance policy can provide financial support to cover final expenses, alleviating some monetary stress during an incredibly difficult time.

Though it may not be suitable for everyone, a child rider offers temporary coverage at a low cost. If designating funds specifically for your children in the worst-case scenario aligns with your family’s needs, it may be worth considering. Take the time to thoughtfully evaluate its importance and relevance to your situation before making any insurance decisions.