What is a Child Term Rider?

Have you been contemplating buying life insurance for your children? If so, there’s some good news on that front.

Though you always have the option, you don’t necessarily need to purchase a separate policy for each child.

The valuable and cost-saving alternative is to simply add a child term rider to your own life insurance policy.

A child term rider is another example of the growing number of life insurance riders that are available to customize your life insurance policy to fit your own personal needs and preferences.

What is a Child Rider On A Life Insurance Policy?

A child term rider is an extra policy provision you can add to your own life insurance policy that provides a life insurance death benefit on one or more of your children.

For example, if you have a $500,000 policy on your own life, you can add a child term rider for $25,000 on each of your children. Rather than paying separate premiums for each policy, you’ll pay only one premium that will cover all.

Under a child term rider, additional coverage is available in units of $1,000. If you want a $25,000 child term rider, you’ll purchase 25 units (25 X $1,000).

You can add a child term rider to your policy for a child as young as 15 days. And because a child term rider is designed for minor children, it must generally be added before your child reaches age 18.

By age 18, he or she will be the age of majority, and therefore eligible to purchase an adult level life insurance policy on his or her own.

Disadvantage

One of the disadvantages of a child term rider, as opposed to a separate policy on each child, is that it does have a set expiration date based on the child’s age. This will be determined by either company policy or by state insurance laws. A typical child term rider will expire by age 21, 22, or as late as 25.

RELATED: 5 Critical Tips You Must Know Before Buying Life Insurance

Advantage

However, one way to get around this potential dilemma is to add a conversion rider to the child term rider. This is another popular rider that gives you the ability to convert the child term rider into a permanent life insurance policy in the future.

If exercised before the child term rider expires, your child will be able to maintain permanent coverage into adulthood.

What’s more, many child term riders with a conversion rider will provide for an increase in coverage. This can be anywhere from three to five times the death benefit on the child term rider.

For example, if the child term rider with a $20,000 death benefit offers a conversion to permanent coverage of four times the initial death benefit, the death benefit will increase to $80,000 at conversion.

In many cases, the conversion can be completed with no additional underwriting.

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How It Works

Child term riders are typically offered in relatively small amounts, ranging from $5,000 to $25,000, though some companies will go all the way to $100,000.

The reason for the low death benefit is that life insurance is generally most closely tied to income replacement of the wage earner. Since children usually have no income, the need for life insurance is primarily for final expenses.

If you want to add a child term rider to your policy, you’ll generally need to be between the ages of 18 and 65, though some companies have even more specific age limits.

RELATED: Check Sample Life Insurance Rates by Age (No Personal Info Required)

In most cases, a child will not need to undergo a medical exam. However, as is typical anytime anyone applies for life insurance, you will be required to provide health information about your child.

And, if there is a pre-existing condition, the rider may not be available if the condition is considered severe.

One of the major benefits of adding a child term rider to your own coverage is that adding it for your first child automatically puts it into effect for all subsequent children.

In addition, while it’s common to add a child rider at the time you apply for your own policy, some life insurance companies will also allow you to do so even after your policy is in force.

Cost

As discussed earlier, child term riders are added in units of $1,000 each. When a child term rider is added to your own policy, you’ll typically be charged a flat fee per unit of coverage for each child. That fee can be anywhere from $5 to $7 per unit.

For example, if you add a $25,000 child term rider to your own policy for one child, at $5 per unit, the cost of the rider will be $125 per year. If you have two children, it will be $250 per year.

If the base cost of your own life insurance policy is $1,000 per year, the cost of adding $25,000 in coverage for each of two children under a child term rider will bring the total annual policy cost to $1,250.

A conversion rider may be available at no additional cost with many life insurance companies. But even if there is a small fee, it will be well worth the cost.

Since no medical underwriting will be required for the conversion in most cases, it will be a way for your child to maintain permanent life insurance even if he or she develops a significant health condition between now and the time of conversion.

Why You Might Consider Adding a Child Term Rider to Your Policy

Cost Savings

It may be less expensive to provide a death benefit for your child or children using a child term rider that it will be to take out a standalone policy on each.

Simplicity

Because child term riders are part of your own policy, there’s no need to maintain separate policies for each person in your household.

The one policy, with one premium, will cover both you and your children.

Conversion to Permanent Coverage

The coverage provided under a child term rider is temporary, typically expiring no later than your child reaching age 25.

But, if the rider includes a conversion rider, you’ll be able to easily convert the temporary coverage into a permanent policy.

Equally important, a medical review is typically not required at the time of conversion.

This will be a major advantage if your child develops a significant health condition that might either preclude getting life insurance entirely or result in a higher premium.

More Coverage Upon Conversion

Though the initial death benefits offered under child term riders are admittedly low, the fact that most child term riders offer three to five times the initial death benefit upon conversion enables a much larger death benefit with a permanent policy.

For example, $25,000 under a child term rider could be converted to up to $125,000 if the conversion allows for five times the original coverage.

Cover Multiple Children Under the Same Policy

Let’s say you take a new life insurance policy on yourself shortly after your first child is born.

By adding a child term rider to that policy, each subsequent child you have will automatically be eligible for coverage under the child term rider.

You won’t need to reapply; it will simply be an automatic process.

Coverage During a Time of the Unthinkable

No one likes to think about the possibility of the death of their child, and it is indeed a rare occurrence. But should it happen, it will be better to have some form of coverage than to have none at all.

Obviously, there will be final expenses, like funeral costs. But, additional financial considerations may be uncovered medical bills as well as funds to tide the family over during the grieving process.

Though we’ve listed this benefit last, it’s certainly the most important—it’s the entire reason for having coverage for your child at all.

Though it’s difficult to consider the loss of a child—and life insurance certainly won’t come close to addressing the emotional cost—it will at least remove the financial burdens that will come as well.

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How to Add a Child Term Rider to Your New or Existing Life Insurance Policy

Like all life insurance riders, the best time to add a child term rider is when you first purchase your policy. That will also give you the advantage of ensuring that all subsequent children will be eligible for coverage.

However, in certain cases, it may be possible to have a child term rider added to an existing policy. You should naturally expect that process to be somewhat more involved.

If you’re looking to purchase a life insurance policy for yourself, and you have or anticipate having children, you should discuss adding a child term rider provision at the time of application.

As life insurance brokers, we work with many different insurance companies, and we know the ones that offer the most flexible and affordable terms for child term riders.

That’s why you’re better off working with us than making application directly with a single company. A single company will only be able to offer you the term riders and other policy provisions they have available.

But as brokers, we can place your application with the life insurance companies offering the riders that best match your needs and preferences.

For example, we’ll be able to match you up with the companies most likely to offer the highest policy conversion rates, as well as those least likely to require a medical evaluation upon conversion.

We’ll do all the legwork for you, and it won’t cost you anything extra for our services. You’ll pay the same premium if we place your policy as you would if you obtain it directly from a life insurance company.

That not only saves you the time it will take to find the right policy on your own, but also saves money, since we will work to get you the most cost-effective policy available.

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