How to Buy Life Insurance for a Child

“The sooner you save, the faster your money can grow…”, “The Five Most Important Money Lessons to Teach Your Kids”

Are you considering buying life insurance for a child?

Piggy bank familyIn last week’s post, “Life Insurance for Children and Grandchildren – The Surprising Benefits,” we revealed why many people decide to get life insurance for a child, from newborns to adult children. Among the benefits:

  • In a properly constructed policy, the cash value of a policy on a younger insured grows at an attractive rate of return for the policy owner.
  • Life insurance represents unparalleled estate planning benefits, such as the ability to transfer assets to the insured free of income, state, or gift taxes.
  • Policy owners appreciate the liquidity and flexibility of the cash value, including the ability to collateralize it or use it themselves, if needed.
  • The policies offer protection from financial loss, including the loss of income of a grieving parent.
  • Getting life insurance for a child guarantees future insurability.

The arguments against getting life insurance for a child commonly presented in popular financial media are typically flawed. They are either based in ignorance or describing whole life policies NOT properly set up or funded with maximum paid-up additions. However, there ARE rules, restrictions, and procedures that you should be aware of if you are considering getting life insurance for a child or grandchild.

5 things to know before you insure a child

1. Insurance limits. In short, the less you earn or the less your net worth, the less insurance you will qualify for. Since children have little-to-no earning power, their HLV (human life value, an insurance term) is calculated much lower than for their working parents.

As a general rule of thumb, a death benefit for an adult will be limited to around 20 times their annual income. Insurance amounts for children are capped at much lower levels—typically about half—than for the child’s parents. There are always exceptions, such as children of parents with a high net worth. In the case of a retiree or someone with significant assets, they will qualify for a death benefit approximately equal to their net worth.

2. Low premiums limit cash value. Premiums are also much lower for children than adults because of low mortality rates. The low premiums limit the amount you can save within the policy. As a result, if you’re looking for a way to put LOTS of money into a high cash value insurance policy, you may be disappointed how little you can put into your child or grandchild’s policy.

3. Insure yourself first. In general, you can’t get life insurance on a child or grandchild whose parents are not adequately insured. We think this is a very good limitation, though it can be problematic in cases where the parents are not insurable for some reason. However, if one spouse is insured, that can work. And it doesn’t have to be whole life. We often recommend combining whole life and term unless you have adequate cash flow to insure your HLV (human life value) with whole life alone.

When insuring grandchildren, the same issue arises. In most situations, the parents of the grandchildren will need to have—and will want to have—adequate insurance. We suggest purchasing for oldest generations first, then the next oldest, etc. While any parent can purchase a small whole life policy on a baby, they will be very limited in how much cash they can save in such a policy.

4. Permission. The only person you can purchase insurance for without receiving their expressed written consent is your own minor children. This is simply the way that insurance works, for everyone’s benefit. If you wish to insure a grandchild who is a minor, the grandchild’s parents must give written permission for the policy. (If divorced, just the custodial parent’s permission is needed.) Adult children or grandchildren must give their own consent to be insured.

5. Insurable interest. If you have no children, you cannot insure a nephew or niece. You may, however, insure a business partner or a spouse. There must be an insurable interest between the policy owner and the insured.

The Process of Getting a Whole Life Insurance Policy for a Child

If you wish to insure adult children or grandchildren, you’ll first need to get everyone “in the same boat.” Adult children may not understand why their parents are getting life insurance, so it is important to understand the reasons you are beginning the policies. It can be helpful to share the research you have done, even policy illustrations.

Personally, we like the “Family Bank” metaphor. High cash value insurance policies can be a key way to build a multi-generational “bank” or fund used to pool family resources, provide financing, and maximize savings in a multi-generational legacy. We have a book that will give you more information and suggestions for building and using your own Family Fund… you’ll find more information below or at this link:
Get Perpetual Wealth, our new book on generational wealth here… for free!

Other essential steps to starting a family bank with life insurance include:

Physical exams and medical history. Children will not get examined at all (depending on the company, up to age 14 or beyond). Insurability is simply determined through medical records. The child’s parents (or the child, if they are over 18) must authorize the insurance company to obtain an “attending physician statement” from their primary doctor.

For some teenagers and all adults, an exam is required. A licensed nurse or paramedical professional will come to your home for your convenience. For younger adults, this will be a very quick a simple exam, involving simple paperwork and a blood and urine sample. Adults may have to go through a more thorough exam. The exam for a teenager or adult involves simple paperwork and a blood and urine sample. This all happens as part of the qualification process, before the policy can be priced or initiated.

Constructing the policy. It is important to remember that there are 3 parties in a Life Insurance contract. The owner, who controls the cash and everything about the life insurance, is the primary role. The insured, who the owner selects, is the person who the death benefit is actually placed upon.  And the beneficiary, which can change at any time and is chosen by the owner, is the person who would receive the death benefit.

Typically, 2 people will play these 3 roles.  A common arrangement is to have the owner and the insured be the same with someone else as beneficiary.  (Dad takes life insurance on himself and MOM IS (NOT A MINOR) the child is the beneficiary.) Another common arrangement is to have the Owner and the Beneficiary be the same.  (Dad could own and be the beneficiary of a life insurance policy on a child or grandchild.) In some cases, Dad might insure his grandchild and name the child’s parent (his son or daughter) as the beneficiary.

A trust can also be the beneficiary, which we will discuss further in our forthcoming book.

Policy Do’s and Don’ts: If maximizing the growth of cash value is a goal of the policy owner, it is imperative that the policy be set up with the proper Paid-Up Addition riders (PUAs).  Policy owners should understand how their premiums and PUAs are to be paid in order to ensure the optimal rate of return. You’ll also need to follow the insurance company’s instructions to not overfund the policy. That could turn it into a MEC,  or modified endowment contract, with less favorable tax law.

We do NOT recommend Universal Life or Indexed Universal Life for children or adults. The only permanent life insurance policy we recommend for children is a whole life policy.

Payments. You will verify with the insurance agent by phone who will be making the payments. You will also get paperwork in the mail to sign. Premiums can be paid monthly or annually. The policy begins when the first payment is made.

The insurance company will pay for both the exam and the physician’s statement. There is no financial cost, risk or obligation in the process of qualifying for life insurance.

Interested in life insurance for a child or grandchild? (Get a quote.)

Would you like an illustration to see how a policy might perform? Or perhaps you still have questions about the process or whether it’s right for you? Either way, we can help! We even have a P4P team member (Theresa), who specializes in working with multi-generational whole life policies. Theresa helps clients get whole life policies on their heirs designed for maximum cash value growth and flexibility. Simply fill out our contact form and we will be in touch to set an appointment.

Coming in 2021: Our new Book on Generational Wealth!

Our new book, Perpetual Wealth: How to Use “Family Financing” to Build Prosperity and Leave a Legacy for Generations, debuts on Amazon in April 2021! (Kindle first, hard-cover and audio book to follow).

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  • Raising children to be financially responsiblenot entitled.
  • Structuring life insurance policies for multiple generations and maximum cash value.
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  • Wisdom from the wealthiest families on “do’s” and “don’ts.”
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22 thoughts on “How to Buy Life Insurance for a Child”

  1. Jennifer Holzapfel

    One of our grandchildren has type 1 diabetes. Would we be able to purchase whole life for her or would she be denied?

    1. Prosperity Thinkers

      Hi Jennifer,
      That is a great question. Your grandchild can absolutely quality for whole life insurance. We can work together to find the right policy for them. Feel free to reach out by sending an email to .

  2. I pay for a life insurance policy for my 25 year old son. I am the beneficiary. Once he turns 26 does he have to take over paying for this policy or get his own policy?

    1. Hi Ben, you may be thinking about health insurance, as I believe a child can only stay on their parent’s policy to age 26.

      With life insurance, typically no changes need to be made. If you are the owner and beneficiary of the policy, you can keep that role. OR you may choose to transfer ownership of the policy to your son, in which case, he may want to change the beneficiary (especially if/when he has a family of his own.)

      In this podcast, I talk about my sister and nephew did a transition such as this 🙂

  3. Can a non custodial parent get life insurance on a child without the consent of the legal guardian? Surely there are rules against this.

    1. You are correct. The legal guardian must sign as insured for the child so answer is No, a non-custodial parent should not be able to get life insurance on a child without the consent of the legal guardian/custodial parent.

  4. I am looking for life insurance plans for my 3 grandchildren, age 10, 7, 5 years old. I want to add extra money ($10 to $50) every month that will go into the US stock market. I would like 100k life insurance plans that I figure will be less then $10 a month. Any help appreciated.

  5. when my two children were young my sister had asked me if she could get a life insurance policy on them and at age 21 yrs each she would give them their policy as a gift and they would take over the monthly payments to continue the policy. They are beyond 21yrs and she still has not given them the policy. I had been in contact with her 4yrs ago and she still has not given them the policy. What can I do? I never received any information because she was the policyholder so I know nothing about the policy my children are 29 and 26 and the policy is still active. What can they do?

    1. Hi Evelyn, this sounds like a sticky situation! Some things to consider… Sometimes policies automatically revert to the children on their 21st birthday, however, if that were the case, I would guess they would have been notified as the premiums would have needed to be paid. If ownership of the policies has not reverted, then the ball is in her court and it’s possible she could have changed her mind or is delaying for any number of reasons. She could have used some of the cash value herself through loans or withdrawals (which she maybe trying to hide or pay back). It’s also possible the policies are alive and well and she is simply generously continuing to fund the policies herself because she can, thereby increasing her gift to them. Or perhaps she may worry that they’re not “ready” to take control of either the payments or the cash value?

      If you know what company the policies were with, the kids may be able to get information themselves. But it also sounds like an excellent opportunity for direct communication with her (from you or your children.) I obviously don’t know your family situation, but I know that families sometimes find it very challenging to discuss financial topics. However, when money can be discussed openly and lovingly without blame, shame, or manipulation, it is a relief to all. Someone may try simply asking her what the status of the policies is and what her intentions are with them. And if no one has been in touch with her recently, it may be more appropriate to establish care and connection first. I’m sure she would appreciate knowing she is thought of for reasons other than financial.


  6. If a noncustodial parent wants to take out a life insurance policy on his minor child, does he have to disclose the policy to the custodial parent?

    1. Thanks for your good question, and I apologize for the delayed response.

      No, parents – either custodial or non-custodial – do not need to disclose to the other parent, nor is permission required. Our multi-generational insurance expert, Theresa, says that “Many times in a divorce situation, one parent will take out insurance on their child where the other parent doesn’t know.” Therese went on to say that the only requirement is that the parent applying does need to have two times the insurance in force for the amount they are applying for on the child (i.e., parent needs $200k policy in force on their own life if applying for $100k on the child).

      You can contact Theresa directly at if she can assist you with a policy application.

    1. Hi Mary, yes, you can also insure great grandchildren. Typically the insurance company will want the great-grandchildren’s PARENTS to also be insured in order to qualify, though the insurance can be with a different company (an existing policy) or even term insurance. Contact us for more information, thanks!

  7. Raymond Brinkley

    I would like to get a life insurance plan for my friends son? Is that possible and if so how do I go about it?

    1. Hi Raymond, great question.

      There must be an “insurable interest” between you and the insured. Typically this is either familial (spouse, child, grandchild, not niece or nephew) or business (business partner, key employee), though there may be additional examples. Basically, the loss of another would have to be shown to affect you in some way, and life insurance companies don’t count friends of children of friends.

  8. I would like to purchase life insurance from a mutual life insurance company for my five grandchildren.
    Can I arrange a large first premium – say $10,000 for each grandchild and then allow the policy to be treated as “paid up” so as to kick start the accumulation of cash value?

  9. Please send me all the info on insuring children and grandchildren- the goal is legacy planning/multi generational planning.

  10. please send me all the info on insuring children and grandchildren- the goal is legacy planning/multi generational planning. thank you it will be the great help to my family`s financial planning for generations to come.

  11. I would like to start a whole life insurance policy on my 21 yr old granddaughter, 19 yr old daughter, 13 yr old grandson, 9 yr old grandson, and 7 yr old grandson. Would like to find out how much monthly payments are. Thanks, Debra

  12. Please send me all the information on insuring children and grandchildren – the goal is legacy planning / multi-generational planning.

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