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Child Life Insurance Explained

Three pros and cons of which clients need to be aware.

By Pete Raj

To many clients, taking out an insurance policy for their child is a matter of negative sentiments, because they don’t want to prepare for the worst since any such unforeseen situation would be devastating.

Keeping the sensitivity of such a topic in mind, many fail to see the other, less obvious benefits of investing in child insurance.  

Unfortunately, the common misconception is that child life insurance is a way to make monetary gain from the demise of a child. Some people might even look down upon this type of policy and discourage family members to opt for it. The truth is, while this type of life insurance has its flaws, there are also the benefits that some might miss out on understanding.

Below we’ve listed the positives and negatives of opting for Child Life Insurance:

The Pros

Future Planning

This is the type of Child Life Insurance policies which has a cash value option for them. For parents who aren’t from economically well-off backgrounds, or those who are looking at alternatives to college savings plans, this could be a potentially viable option.

Since these policies allow the parents to withdraw certain amounts while the policy is still active, they can very well do so if they need to bridge the gap for a tuition fee, or to purchase expensive learning supplies. And of course, the policy continues to grow as long as the premium is paid on time so that it can be a win-win situation for everyone.

Starting Early

As kids grow older, some parents might not be aware of any genetic conditions they might have, or they could even contract a chronic disease unexpectedly. In such a case, most policies wouldn’t be valid for them, because it’s difficult for someone with such medical conditions to take up Life Insurance.

However, if they happen to start earlier, before the detection of any such condition, the child can still benefit from the policy even if they are older. Parents who are genuinely interested in planning for contingencies, this particular factor would be an attractive reason to take up Child Life Insurance.

Covering Expenses

In any case, life is unpredictable, so if there is an unfortunate event of the child passing away, there are some mandatory expenses like medical bills and final rites that need to be taken care of. And yes, these expenses are on the higher end of the spectrum, which means the family can surely make use of some extra financial help.

While this is a sensitive factor to touch on, one must also remember that families with younger kids don’t have so much money at their disposal, and having support through a life insurance policy would surely help with lightening their burden in such unfortunate times.

The Cons

The Harsh Truth

The biggest con about Child Life Insurance is the harsh reality it puts in front of parents. The fact there’s even a slight chance of them losing their child isn’t something they want to be faced with. It’s this simple but powerful denial that builds certain negativity among parents for such a policy, probably because it also means the acceptance of the truth. Hence, for a professional to be able to put forth the right words and sell such a policy, it requires a great deal of communication and persuasion skills, along with sensitivity and practice as well.

Initial Cost

Child Life Insurance policies are, in fact, a lot more expensive than policies given to adults. Firstly, not a lot of people opt for such a policy, which is why the supply is more than the demand. This automatically creates a surge in the price of these policies. A higher initial investment could be a reason for parents to reject taking it up and seek other cheaper alternatives. If college savings is a potential reason, there are a number of plans like the 529 Savings Plans which are comparatively cheaper and a more suitable option for most.

After Birth Health Issues

Children who are born with medical conditions, or have conditions that crop up right after birth would not be eligible for most life insurance policies. So, if a family does come up to you for advice in such a situation, they would unfortunately not be able to invest in one. In some case, they might not be able to detect the issue until the child is a few months old, but if there is medical proof that the child has had this issue since birth, taking a policy would be quite difficult.

Child life insurance policies are surely unconventional, and even if a family is open to purchasing one, there’s still going to be a lot of initial hesitation and queries that need to be cleared first. As a professional, the most important step would be to build a repertoire of comfort and trust with the family first. The next step would be to lay out the pros and cons, of course giving more weight to the positives.

You have to know your audience and tap on the factor that would matter most to them. The most common reason for a family would be a safe backup fund for their child’s unforeseen expenses or tuition charges, in case they’re unable to meet them without any financial assistance. It’s a tricky situation, but surely one that can be worked around!


Pete Raj is affiliated with, an independent online consumer facing insurance agency, and marketplace.

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