What Is a Child Rider on Life Insurance?
Child insurance riders allow you to supplement your life insurance policy with additional coverage for all your children. If any of your children were to pass away before reaching a predetermined age, a child life insurance rider would provide you with a small death benefit transferable toward burial expenses. These benefits typically pay between $5,000-$25,000, just enough to cover average funeral costs and occasionally a little extra.
Traditionally, you must elect for a child rider at the onset of a new life insurance policy, though some insurers may allow you to add one long into your policy’s term. One child insurance rider should cover all current and future children under your care.
Table of Contents
What Is an Insurance Rider?
Insurance riders allow customers to customize their insurance policies with optional coverages not typically included with a stock plan. Insurance riders usually raise your monthly premium, though some insurers offer complimentary riders for preferred policies and policyholders.
In addition to a child term rider, you can fortify your life insurance policy by adding any of the following riders:
- Guaranteed insurability
- Waiver of premium
- Return of premium
- Accidental death
- Accelerated death
- Spousal insurance
- Family income benefit
- Term conversion
- Term insurance
- Disability income
- Cost of living
- Critical or chronic illness
Only some insurance companies offer every rider listed here, so try to shop around and find your best options before committing to a long-term contract.
How Does a Child Term Rider Work?
Child term riders provide coverage for all the children in your home until their “age of maturity,” which your insurer will place somewhere between ages 18 and 25. These riders raise the cost of your monthly premium, though sometimes only as little as an additional $5 per month for policies with a lower death benefit. Most insurance companies will not require you to answer medical questions about your children before taking out a rider. Still, they will factor any preexisting conditions into their final decision to provide coverage.
If your child were to die during the policy window, you would receive a tax-free, lump-sum death benefit determined by the agreed-upon terms of your rider. If your child lives past their age of maturity, they can choose to convert their child rider into a permanent life insurance plan. Every life insurance company imposes different requirements, exemptions, and flexibilities with their riders, allowing families to choose the best insurer for their situation.
The Pros and Cons of Adding a Child Insurance Rider
As with any other contract dealing with hypothetical events, adding a child insurance rider to your life insurance policy comes with a unique set of advantages and pitfalls.
Key benefits of adding a children’s rider to your life insurance policy include:
- You can add one for a marginal fee. For as little as $5-10 per month, you can secure a death benefit guaranteed to cover funeral expenses and replace some of the income lost during grief.
- You would not have to worry about interment costs. Worrying about expensive burial fees can directly exacerbate an already stressful and devastating situation. Children’s term riders insulate grieving parents from the harsh transactional elements coupled with a family death.
- It can guarantee a child’s insurability. Children who live beyond their rider term can elect to convert it to a permanent life insurance plan without undergoing any medical underwriting, directly benefiting those who develop life-altering disorders at a young age. Once the rider has converted, your adult child can also withdraw money from the same account to fund their personal needs when necessary.
While child term riders offer an affordable means of preparing for the unimaginable, consider the following limitations before including one with your life insurance policy:
- They offer limited coverage. Parents may want to take some time off work to grieve following a loss and often get left with outstanding medical bills that well exceed a child’s death benefit. Child riders only offer a maximum payout of $25,000 following the death of a child, most of which gets eaten up by funeral expenses.
- Coverage can end early. All child riders impose age restrictions for the parents, most commonly terminating once either parent reaches age 65. That said, some riders expire once a parent turns 55, directly affecting children born later in their parents’ lives.
- Converting can prove limiting and expensive. If your child chooses to convert their rider into a permanent policy, insurers will only offer marginal coverage beyond the original death benefit. Companies will also automatically assess children who bypass medical underwriting with standard-risk insurance rates, disadvantaging low-risk, healthy individuals.
How Much Does It Cost To Add a Child Insurance Rider?
You can generally purchase a child rider in coverage levels of $5,000, maxing out at a $25,000 death benefit. Though this will vary by insurer, every $1000 of coverage typically equates to a $5 spike in your annual premium. The cheapest possible riders can fall as low as an extra $50 per year tacked onto your life insurance premium.
Taking out a child rider before ever having children can maximize its benefits. Riders already in play guarantee coverage for all future children, even those born with preexisting conditions.
How Many Children Can You Add?
One child term rider should cover all your biological offspring, adopted children, or stepchildren, either living or soon-to-be-born. You can add any children currently within 15 days to 18 years old onto an existing child term rider. Insurance companies will not limit the number of children allowed on a single rider as long as they all fall within age eligibility requirements.
However, you cannot include your grandchildren with a child term rider, as their parents must consider them under their own life insurance policy.
How Long Does the Rider Last For?
The longest-lasting riders provide coverage for children until they reach the age of 25 or get married. Alternatively, the shortest riders cut off the day a child turns 18. Insurance companies will void coverage for all children on a rider whenever their parents’ life insurance policy expires, or those parents meet the agreed-upon cutoff age — typically between 55-75 years old. Older parents with younger children should consider these limitations before purchasing a child term rider, as their coverage may terminate before their children mature.
Qualifications and Exemptions for a Child Insurance Rider
While securing a life insurance child term rider should prove relatively straightforward, children and their parents must meet all eligibility requirements imposed by their chosen insurance company.
Most children should easily qualify for a child rider on life insurance as long as they do not suffer from a preexisting or life-threatening condition. You can circumvent the risk of losing your rider to preexisting conditions by purchasing one before having children. Children born at a later date get grandfathered into your existing child rider and receive all the benefits of that policy without further examination. You can only annex living children onto a preexisting policy if they are still within 15 days to 18 years old.
While insurance companies will not expect your children to undergo any in-depth medical examination when applying for a child rider, they will still ask fundamental questions about their health to identify any preexisting conditions. These companies will likely view terminally ill children or those with chronic disorders as high-risk and deny them coverage. However, even this can vary depending on your insurer.
Furthermore, some states impose insurance regulations prohibiting companies from offering child term riders. Your child will not qualify for coverage if you live in one of these states.
Alternatives to a Child Insurance Rider
If the coverage offered by a child insurance rider feels too limited, you might consider buying standalone child life insurance.
Child Term-Life Insurance
Similar to a child term rider, a child term life insurance policy offers compensation for the unfortunate death of a child should it occur during a fixed period. Child term-life insurance can reward parents with a slightly higher death benefit than a child term rider, though it often costs significantly more without offering any additional perks. As with child riders, child term-life insurance policies do not build cash value. Parents lose all return on their investment once these plans expire.
Child Whole-Life Insurance
Similarly, child whole-life insurance offers a death benefit of up to $50,000 but allows this coverage to extend into adulthood and throughout your children’s entire lives. Child whole-life insurance can cost up to five times that of a child policy rider.
One of the main benefits of child whole-term life insurance is the cash value built by these accounts over time. Your child can borrow from or withdraw this cash as needed later in life or simply continue paying their monthly premiums to bolster their policy’s cash value. In this sense, child whole-life insurance doubles as a savings bond.
Converting the Rider to a Permanent Policy
In an ideal world, no parent should ever have to use their child term policy rider. Luckily, surviving children can convert their child rider into a permanent life insurance plan with up to 5 times the amount of coverage as long as they agree to take over premium payments and keep the policy from lapsing.
Transitioning from a rider into a permanent policy can benefit offspring who developed severe conditions during childhood that would otherwise bar them from life insurance later on. Piggybacking off their child rider would lock them into permanent coverage without requiring a medical evaluation.
Nonetheless, permanent life insurance policies can cost up to 15 times higher than standard child riders. Freshly matured adults might not possess the capital or the desire to extend such a plan.
Who Should Add Their Child To Their Policy?
Child riders make the most sense for lower-income families who would suffer significantly from the funeral and burial costs generated by the death of a young child. Average funeral costs in America fall around $7,640, and this expense can be challenging for most families — especially when it’s unexpected.
Younger parents with larger families can reap the greatest benefits from these riders, as they will remain eligible for a broader timeframe. A single rider would likewise offer blanket protections for all the children in their care. If you fear your child might develop a life-threatening condition before they mature, including them in your policy will guarantee them life insurance as adults without risking the rejection posed by medical underwriting.