Over the years, one of my favorite life insurance riders has been the children’s term rider. The children’s term rider is an often overlooked because a lot of agents haven’t sat down and figured out how to use it properly. In this article, I’m going to list my three reasons to add the child term rider and go into more detail about how and when I like to use it.
What is the children’s term insurance rider?
A child term rider is an option you can add to your life insurance policy for a small extra premium. It provides an additional amount of term life insurance for each of your eligible children.
Reason #1: One low rate for all eligible children no matter how many you have
The first reason I like to add the child term rider is if you have a lot of kids. For example, if you have six children, you might not want to buy a individual policy for each child because each individual policy requires a separate premium for each child.
However, with a child rider, it’s one rate for all kids. It’s also pretty cheap.
For parents that have a lot of kids, it’s so inexpensive per child, it’s crazy not to add it.
Reason #2: New children are usually added automatically after a certain number of days
I often work with employees who buy permanent life insurance during an open enrollment period at work. Once the enrollment is over, they may have to wait to buy additional life insurance until the next enrollment. This might be a year later.
If you are expecting a new child in a few months, you might not want to wait several months until the next enrollment to get life insurance on your child.
Here’s where the child term rider can help. That’s because new children are often automatically covered under a child term rider a couple of weeks after they are born.
In order for this to work though, you’ll have to already have children. Most insurance companies won’t let you add the child rider if you don’t have any children.
But if you do have eligible children, you can add the rider and a few weeks after your child is born, they'll be covered under the rider. This reduces the time a child would be without life insurance coverage.
Then, when the next enrollment comes around, if you want to pick up some permanent coverage, you can look into it at that time for all of your children.
Reason #3: Convertible without any medical questions
This is my favorite feature of a child term rider. Most of the child term riders I have worked with have had a guaranteed conversion option.
This means that you can change the child term rider from a term policy that will expire at a certain age into a permanent policy that the child can keep for life.
This is a huge option if you have a child who gets a health issue while covered under the rider. You’ll be able to convert without any medical questions and might be able to get a policy for your child that you wouldn’t have been able to get any other way.
In addition, sometimes the amount of life insurance you can convert to is higher than the amount of insurance provided by the rider.
Additional things to know about child term riders
Now that you know some of the reasons I love child term riders. Here are some other important things you should know about child term riders.
- Check eligibility Be sure to check who is an eligible child to be covered under a rider. Eligibility may be affected by age and whether they are a dependent or not. You as the insured will also have to be within certain ages to add a child rider.
- Add all kids who are eligible on to the rider Sometimes, parents will exclude children who are otherwise eligible. Include all eligible children because there is no difference in price to list them on the rider.
- Child term riders expire at a certain age Child term riders can’t be used as permanent insurance because they will expire when the kids reach a certain age.
- Grandchildren can’t be covered under a child term rider Child term riders don’t extend coverage to grandchildren unless you’ve adopted them. You’ll have to buy individual permanent policies on them.
- Buy the max child term rider I always offer the max child term life rider people can get. The cost is so minimal it only makes sense to do that.
- Conversion ages and options can vary You’ll want to know at what age you can convert a child term rider. Be sure and read the contract to see what those options are.
- Child term riders might change to paid up coverage upon the death of the parent Find out what happens if you die. Does the rider continue? In most case, the answer may be yes.
- You’ll have to remove a child term rider once all of your kids age out The insurance company doesn’t automatically remove a child term rider. That’s because they don’t know if you have had any additional kids since it was put in place. If all of your children are no longer eligible, you’ll want to drop the rider. No sense in making that life insurance mistake and paying for a rider you no longer benefit from.
Those are some important additional tips to remember about child term riders.
Don’t let your child term riders expire without reviewing them
It’s my guess that most child term riders expire without anyone reviewing whether conversion to a permanent policy makes sense. Don’t forget about your child rider or let it expire without at least checking into it.
I’ve had people forget about the rider and miss their option to convert the rider to a permanent life insurance policy for their child.
Unfortunately, once the coverage expires, the conversion options available under the rider also expire.
Read your life insurance contract
As always, every life insurance contract is different. You have to read your contract to see what is allowed.
I love the child term riders. It’s a cheap way to get coverage if you are tight on cash. You can cover a bunch of children for very little money. And, if the child rider is part of a guaranteed issue offer at work, it’s a great way to get coverage for a child who might not have otherwise been able to get a policy.
Over the years, I’ve helped a ton of parents get coverage that way. Be sure and check into it.
Let me know if you have any questions about this in the comments below.