Some insurance companies offer life insurance policies for children. Though a small percentage of families are in the position to consider buying life insurance for their children, let’s take a look at the advantages and disadvantages.
The advantages: Allows the child to have some sort of coverage as they age, they can borrow against the policy later and the policy seems inexpensive compared to the cost of insurance for adults.
The reality: These policies seem inexpensive compared to a life insurance policy for an adult, but when the expected cost is taken into consideration, they are relatively expensive (even after figuring burial costs). This money that is spent to insure the life of a child could be invested in an education fund, emergency fund or some other type of fund for the child at a significantly higher interest rate. What is the purpose of insuring the life of a child?
The important individuals to insure are the breadwinners, the individuals the family relies on for income or other essential support that would otherwise cost money to replace (i.e. stay at home mom taking care of children) and most children do not bring in substantial, if any income. If there are extra funds, consider it. But a family that can afford an insurance policy for a child is typically sufficiently well off that they don’t really need the coverage. I consider these policies controversial at best.