How much life insurance for my children should I buy?

You’ve already answered one important but difficult question: do you need life insurance for your children? Now, it’s time to decide how much. The decision will depend on your goals, how much you’re comfortable paying, and how much coverage you want.

How much life insurance do you need for children?

At the minimum, you want enough life insurance for your child to pay for funeral expenses. The average cost of a burial is around $8,000 (around $7,000 for cremation), so aim for a minimum of $8,000 in coverage. Note that this minimum coverage goal above does not account for any medical expenses, and it likely does not provide any future financial benefits.

Covering funeral and medical expenses

In addition to funeral expenses, you may need to pay for medical care your child receives. On average, parents pay around $1,300 out-of-pocket for pediatric hospitalizations. For some families (around 14%), hospital bills exceed $3,000.

If you are purchasing life insurance to cover your children’s’ final expenses, then the coverage that a rider provides may be sufficient. A life insurance rider adds coverage for a child to the parent or guardian’s existing plan. This option is usually the least expensive, and a rider can be converted into a permanent policy for your child in the future.

However, after the loss of a child, you’ll likely need time off work. Unless you have an unusual amount of vacation or sick time, you may require some extra cash to cover the bills while you grieve. A stand-alone policy with a higher benefit amount may be more ideal since it could help pay for funeral expenses and a few months off the job. A higher benefit amount also means a higher monthly cost (premium).

Future insurability

If you are more concerned with making sure your child can benefit from a life insurance plan into their adulthood, consider getting a permanent, stand-alone policy when they are young and healthy. Rather than a life insurance rider or term plan (which sets terms of coverage that will end), consider a universal or whole life insurance plan.

Universal and whole life insurance plans may cost more, especially when paying for a plan for 18 years, but they will help ensure that your child is locked in on premiums, insurability, and plan benefits. You don’t need the highest benefits amounts to help future insurability; just make sure you stay up to date on your premium payments.

Making an investment for the future

If your goal is to gift this policy to your child when he or she is an adult, then you may want to take the highest amount of coverage you can get through a plan that has savings and growth components. These are usually available with universal and whole life insurance policies. The highest amount of coverage, and highest growth opportunities, mean the highest premiums. If you can afford to maintain these plans until your children are ready to take over the premiums, it’s a great gift for your children’s financial future.

HealthMarkets Can Help

If you need help deciding the coverage type or amount to purchase for a child, let HealthMarkets assist you. A licensed insurance agent can help you decide how much life insurance makes sense for your children. Call (800) 827-9990 today to get a quote at no cost to you.