What Is Required For Grandparents To Buy Their Grandchildren Life Insurance?
Despite some websites erroneously claiming otherwise, grandparents wanting life insurance for their grandchildren do not need permission (verbal or written) from the child’s parents.
With most companies, the sheer nature of your relationship gives you the privilege of insuring them without needing input or consent from any third party.
To apply, you’ll only need the child’s full name and DOB. You will not need their social security number.
Most children’s life insurance companies will ask a few health-related questions, and no medical records or physical exams are ever required.
If your grandchild was born with a health condition(s), you can still apply to see if they are approved. The worst-case scenario is a declined application.
That said, here’s a list of common health conditions that will 100% result in decline:
- Down syndrome
- Diabetes
- Sickle cell anemia (sickle trait is okay)
- Spina Bifida
- Heart conditions
Other medical conditions could result in a declined application. Those are just some of the most common ones.
Thankfully, most children are in good health, which means they will easily qualify.
Benefits Of Buying Life Insurance For Grandchildren
There are four main benefits of buying your grandchildren a life insurance policy.
- Future insurability: Nearly all child life insurance policies guarantee that the insured children can purchase more coverage later in life. Additional coverage is guaranteed and not subject to underwriting requirements. That means if they develop some health issues as adults, they can still acquire more coverage and maintain their financial security.
- Peace of mind: Albeit rare, child deaths do happen, and final expenses aren’t cheap. The typical funeral costs nearly $10,000 in most states. A life policy can give you and your loved ones peace of mind, knowing their unexpected death won’t create significant financial hardship.
- Lifetime coverage at a rock-bottom rate: If you buy your grandchild a whole life insurance policy, the price will be extremely low due to their young age. They will have lifetime financial protection, and for the rest of their lives, they’ll have a policy they can rely on that costs just pennies per day.
- Savings for future use: Children’s whole life insurance is a type of policy that will build cash value. Cash value is like an unseen savings account that continually grows. Every time you make a payment, a small portion goes into the cash value account. It also typically earns interest (varies by the company). You can access and use the cash value anytime later in life for any purpose. It can act as college savings, down payment assistance on a home, or pay for medical bills, financial debts, or anything else you want.
How Much Does Life Insurance Cost For A Grandchild?
Whole life insurance for grandchildren will generally cost $19-$35 monthly for roughly $50,000 in coverage. Your actual premium payment depends on the kids’ age and the amount of coverage you buy.
Below is a table showing the monthly cost of Mutual of Omaha’s children’s life insurance.
| AGE | $10,000 | $25,000 | $50,000 |
|---|---|---|---|
| 0-4 | $4.61 | $10.02 | $19.04 |
| 5-9 | $5.43 | $12.08 | $23.17 |
| 10-14 | $6.15 | $13.87 | $26.75 |
| 15-17 | $7.75 | $17.87 | $34.75 |
| Source for monthly prices: Choice Mutual child quote calculator. Rates valid as of 05/21/2024. | |||
How Does Life Insurance For A Minor Work?
Life insurance for a minor is the same as an adult policy. The only difference is that a third party buys the policy (children cannot buy it themselves).
In most cases, children’s life insurance will be a whole life policy, but some (not many) offer term life insurance for children.
Whether term or whole life, if the child dies while the policy is in force, the insurance company will pay the death benefit (tax-free) to the beneficiary(s). The life insurance payout money can be used for any purpose.
If you buy a term policy, it will generally last until the child turns 25, at which point the coverage will terminate.
However, if you opt to buy your grandchild a whole life policy, the premiums will never increase, coverage won’t decrease, and it will last their entire life (it’s a permanent life insurance plan).
Whole life insurance products also include a behind-the-scenes savings account called “cash value,” which allows for tax-deferred growth.
A portion of each payment is routed into this account, and it typically earns interest.
The money in the cash value account can be withdrawn by the policyholder and used for anything, such as college expenses.
You can transfer ownership of the policy to the child when they are an adult. Some companies, such as the Gerber Grow Up Plan, automatically transfer ownership once the children turn 25, but most allow you to choose when and if you do so.
Coverage Limits
Most companies will allow a grandparent to buy life insurance coverage for a grandchild between $5,000 and $75,000.
If you want more than $75,000, you’ll need to buy multiple policies from multiple companies. There is no law or rule preventing you from doing so.
Frequently Asked Questions
Generally speaking, Mutual of Omaha offers the best whole life insurance for grandkids. They typically have lower premiums than other providers, excellent added benefits, an easy application process, and up to $50,000 in coverage. Globe Life children’s insurance is also a good option because it allows you to buy coverage for grandchildren as old as 25. All other children’s life insurance companies have a maximum age limit of 17 for new applications.
Yes, you can buy multiple policies from different insurance companies.
All whole life policies (for minors or adults) accrue cash value. The only type of life insurance that does not build cash value is term life insurance. It is important to remember that only the policy owner can access the cash value.
Insurable interest is what life insurance companies require for a person to buy life insurance on someone else. In layman’s terms, it is the financial or legal interest you have in the insured person if they died. In other words, how would their death affect you legally or financially? Fortunately, the nature of your relationship (grandparent or great-grandparent) satisfies this rule and thus entitles you to buy a policy on a grandchild. For example, you cannot purchase life insurance on your neighbor because you would not be legally or financially affected by their death.
Nearly all children’s life insurance companies allow grandparents and great-grandparents to buy a policy on their grandchildren.
First, the death benefit is paid out tax-free. However, withdrawing the cash value and giving it to a grandchild could result in gift tax implications, so it’s best to consult with your CPA before doing so.
Legal guardianship is not required to buy life insurance for your grandchildren.
Most children’s life insurance companies have an online application where you can fully apply online without having to speak with an insurance agent. Not all, but most do.
Gerber Life and Globe Life offer child life insurance policies in New York.
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