When you buy a life insurance policy, you have the choice to add a child rider to that policy. A child rider is an add-on coverage that offers a death benefit payment in limited increments for your children if they pass on before you. If your policy lapses or is paid out upon your death, the coverage on the child rider will stop.
Many parents wonder if it is a better idea to get child policies instead of child riders, and in many ways, it can be. Let’s look over the benefits of each to see which option fits your needs.
Child Riders Cover All Children
When you buy policies for each of your children, you must buy an individual policy for each child. Generally, child riders—once they are in place—cover all the children you add to your family automatically. Not only can this save you money, but it can also make premium payment easier.
Child Polices offer Premium Protection
When you buy your child his or her own permanent or whole life policy instead of adding a child rider to your own, you are locking in life insurance premium rates when they are at their lowest. This guarantees that as long as the policy is active, your child will be covered at their initial premium cost. Since a child rider will only cover children until a certain age, they do not afford the same premium protection. Child riders may be convertible once the child reaches the age limit, but the premiums on the converted policy will be determined based on their current age and will be much higher than they would have been if you’d bought them a child policy ten or twenty years ago. In addition, child riders expire once the main policy holder dies, leaving your child with no coverage.
One advantage to buying your child his or her own life insurance policy instead of a rider is that permanent policies build up cash values that your child can borrow from to help them pay for college, buy a home, or deal with any other large expense they face as they age. Child riders do not accrue any cash values, so your child would not have access to this helpful savings.
Buying life insurance for your children is important, no matter how you choose to do it. While child riders can save you some money, they have many restrictions and drawbacks that could make their purchase the wrong choice for your family in the long run. Consider your goals and your budget before deciding whether a child policy or child rider is the best fit for you. Call us today at 800-511-2892 for more information about life insurance or get a free Lexington KY life insurance quote.