Is Life Insurance for Kids a Good Idea?

Yes—life insurance for children can provide guaranteed coverage for life, build cash value, and lock in low premiums early. Many parents choose to insure their children as a long-term gift that grows with them.

Top Benefits of Life Insurance for Children

• Guaranteed Insurability: Once covered, your child can’t be denied later—even if their health changes.
• Cash Value Growth: Whole life and IUL policies build cash value that can be used for college, a first home, or emergencies.
• Locked-In Rates: Premiums are typically much lower when coverage starts at an early age.
• Legacy Planning: Parents and grandparents often use it as a tool to pass down financial security.

Important IRS Rules to Know

• IRS Insurable Interest Requirement: A parent can take out life insurance on a child if there’s an insurable interest—such as a parent-child relationship.
• Policy Value Restrictions: Per IRS guidelines and insurer underwriting, a parent’s own life insurance coverage must typically be at least 50% greater than the amount purchased for the child.
• Tax Benefits:
  • Cash value grows tax-deferred
  • Withdrawals and loans may be tax-free under IRC §72
  • Proceeds are income tax-free under IRC §101(a)

Common Types of Life Insurance for Kids

Policy Type	Key Features
Whole Life	Fixed premiums, guaranteed death benefit, slow but steady cash value growth
Indexed Universal Life (IUL)	Flexible premiums, market-tied growth potential, higher long-term cash value

Real-World Uses for the Policy’s Cash Value

• College funding
• First car or home down payment
• Emergency fund
• Business startup
• Financial leverage without credit checks

What to Look for When Buying a Policy

• Reputable life insurance provider
• Policies that allow future coverage increases without medical exams
• Flexible riders (e.g., critical illness, accidental death)
• Low fees and high early cash value growth (especially with IUL)

Life Insurance for kids

Can secure lifelong coverage, build tax-advantaged cash value, and lock in low rates early. Per IRS guidelines, parents must carry at least 50% more coverage than the amount placed on their child to ensure proper financial alignment. Common uses for the cash value include college savings and emergencies.