MoneyLife

What Is a Child Term Rider?

By Alison Kimberly
child term rider

Who wants to think about losing a child? No one. But in the case of such an unfortunate event, adding a child term rider to your life insurance policy at a small additional cost will remove the financial burden. Rather than taking out an additional life insurance policy, adding a child rider on term life insurance can help cover hospital expenses, funeral costs, and other expenses. 

Beyond that, it ensures that your child is insured if they develop a condition later in life. It also ensures insurability if they later decide to take up what insurers consider a high-risk hobby – like scuba diving. Adding a child term ride also locks in low insurance rates for you and the child. 

You can add a child as young as 15 days, and you can continue with the child term rider until they are 18 or 25, depending on the policy. In some cases, you can then convert this into whole life insurance for the child. Here is what you need to consider before adding a child term rider:

How does a child term rider work?

Child term rider works like standard life insurance, but in this case, you pay a premium per $1000 of coverage per child, grandchild, or stepchild. Some policies will expire at age 18, while others will extend until age 25. Some give you the option to convert the policy to adult life insurance when the child turns 18 or 22. 

At what age does a child term rider policy begin?

A child term rider policy can begin when the child is 15 days old, or at any later age up to age 18. 

Can multiple children be under the one child term rider policy?

Generally, a single child rider will cover all children, stepchildren, and adopted children in the household. However, this varies by policy. Some policies require the children to be named in the rider for coverage. 

What happens to my child’s term rider policy once they reach maturity?

When your child reaches maturity, you may have the option to convert it to term life insurance. However, if you do not convert it by the set deadline, the child’s term rider policy will expire, leaving them without coverage. 

What happens if I don’t convert my child’s term rider policy?

If you don’t convert your child’s term rider to a permanent policy, your child will be without coverage when the child term rider expires. You will have the option than to purchase a new term life insurance policy for the child as a young adult. 

Will the rates change for my child if the policy is transferred to them at age of maturity?

Yes, the rates may change when the policy is transferred at age of maturity. This will vary by insurance provider and your specific policy. Always check with your insurance provider when transferring the policy at age of maturity to confirm policy rates going forward. 

Important child term rider factors to consider

When adding a child term rider to life insurance, you give your child a few key advantages. Here is what you should consider when selecting a child term rider:

Coverage

Some child term policies will have an especially low maximum, like $50,000. Others will not allow you to increase coverage at the age of maturity. Choose a child term rider that covers your current needs, and has enough flexibility to adjust as your child grows. 

Insurability

The biggest advantage of a child term rider is that your child is automatically considered insurable without a medical exam. That means that they can get coverage even with illness later in life. 

Age of maturity

Some policies expire at age 18, while others cover the child until age 25. Consider the policy that will cover your child for the period required, or that gives options for extension. 

Conversion

Are you able to convert the child term rider to whole life insurance for the child? If so, that will give your child the greatest protection and insurability in their young adult years and beyond. 

Age of termination

Many child term riders will terminate when the original policyholder reaches the age of 65. In some cases, this is 55. If you have children later in life, you may reach 65 before they turn 25, terminating their child term rider prematurely. Check with your insurer before purchasing a child term rider if you are concerned about premature termination of the child term rider. 

Advantages of a child term rider

There are three primary advantages of the child term rider. They are:

  • Removes financial burden– In the case of the death of a child, medical and funeral expenses are covered without dipping into your savings or going into debt.
  • Low cost- Child term riders are typically low-cost additions. For a $25,000 death benefit, you’ll pay about $11 a month.
  • Secures Insurability– Perhaps the biggest driving factor for a child term rider is that it guarantees insurability of your child if they are later diagnosed with a disease, take up a high-risk sport, or would be considered uninsurable. 

Taken together, these advantages are strong drivers for the peace of mind and protection you can provide to your child from a young age. 

Disadvantages of a child term rider

The primary disadvantages of a child term rider are the financial trade-off when you purchase life insurance for a child. That money could be used instead to provide for the child’s well-being in other ways. For example, a child term rider has a lower rate of return than a 529 college savings plan, meaning it is not the best savings option. 

It is a long-term commitment, with low coverage. In the event that something does happen to the child, it might not be enough to cover large medical bills or other unexpected expenses. 

Child term life insurance rider vs child whole life insurance 

Child term life insurance rider covers the child until the specified age of majority, while child whole life insurance covers the child with premiums that are guaranteed never to increase. Both types of policies have many of the same advantages of security, financial protection, and ensuring insurability. 

Which policy is right for your family will depend on personal circumstances and available policies. Grandparents also might choose to gift a grandchild with a whole life insurance policy to lock in premiums and insurability. 

Protect your family’s future

What is a child rider on term life insurance? It is a low-cost way to protect yourself financially while securing your child’s future insurability. You can often cover multiple children under one child term insurance rider. In many cases, the child term rider can be converted when the child reaches the age of maturity. 

As a parent, you want to protect your child from every possible misfortune in life. Child term insurance is one way to ensure that whatever the future brings, they have life insurance and you are financially secure. However, child term insurance is one small piece of the total financial picture.

Personal financial tracking, investing for the future, and working towards financial goals will also help to protect your family. You can set up a direct deposit into your MoneyLion account, and it will automatically activate MoneyLion Safety Net. This direct deposit increases your Instacash options up to $1000 at 0% APR. Taken together, you can work towards financial security now and for your family’s future. 

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