Life Insurance for Grandchildren – What You Need to Know

The gift of being a grandparent is one of life’s greatest blessings. While giving their grandchildren toys and clothes is fun, grandparents can also give them financial security. In addition to providing invaluable peace of mind, a life insurance policy can help you build financial security for your grandchildren.

Why You Should Consider Life Insurance for Grandchildren?

Once grandparents get the consent of the child’s parent or legal guardian, they may purchase whole life insurance as extended caregivers. (Whole life insurance is the only type of life insurance that can be purchased for minors.) The policy can be purchased in the child’s name, which means the child becomes the policy owner when they become an adult.

Permanent whole life insurance provides a set amount of coverage for your lifetime. The premium for whole life insurance never changes – what you pay one month will be paid every month you own the policy.

When given as a gift to grandchildren, a whole life insurance policy can last a lifetime. In addition to providing a death benefit, whole life insurance accumulates cash value every year and can help your grandchildren get a head start financially. With a whole-life policy, the insured can lock in a premium at their current age for the remainder of their life, while a whole-life policy generally increases in premiums with age.

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Top 4 Carriers Offer the Best Life Insurance For Grandchildren

Foresters Life Insurance

Let us take a moment to talk about Foresters Life Insurance before we continue. They’ve served families for decades, so they come highly recommended. Foresters isn’t just about insurance; it’s about family and community. 

As a company, they believe in the larger picture: supporting families, building strong communities, and securing a secure future. As a Foresters family member, your grandchild is not just a policy number but a valued member of the Foresters family regarding insurance.

You don’t just buy a policy with Foresters; you invest in a legacy that matters most to grandparents planning life insurance for their grandchildren.

Foresters Life Insurance Pros and Cons

Pros	Cons
Variety of life insurance options.	Some products are not available everywhere.
Access to unique member benefits.	Possible eligibility restrictions.
Financially stable company.	Premiums may be higher than some competitors.
Strong community involvement.	Complex product options can be confusing.
Offers living benefits.	Underwriting can be lengthy for some policies.

Mutual of Omaha

The Mutual of Omaha name has been synonymous with insurance for over 100 years. They offer many types of insurance plans that people have come to trust. Their insurance plans are one of the most reliable options for grandparents looking after their grandchildren.

This company is frequently mentioned for its financial soundness and the value it offers in its whole life insurance policies for grandchildren. Mutual of Omaha provides:

• Competitive rates.
• An easy online application process.
• High coverage options with beneficial add-ons.

Mutual of Omaha Pros and Cons

Pros	Cons
Diverse insurance options.	Some policy restrictions.
Financially stable.	Variable premiums.
Offers living benefits.	Strict underwriting for higher coverage.
Good customer service.	Not available in all states.
Easy online management.	Age limits on some policies.

Gerber Life

For over 50 years, Gerber has made baby food and provided life insurance for kids. Their policies are easy to understand and focus on families. Grandparents can count on Gerber to help protect their grandchildren.

Gerber Life offers whole-life insurance policies that range from $10,000 to $50,000 for children up to the age of 14. It has an excellent financial rating and a long-standing reputation as an industry leader.

Gerber Life Insurance Pros and Cons

Pros	Cons
Specializes in children’s policies.	Limited options for adults.
No medical exams for most policies.	Generally, higher premiums.
Policies accumulate cash value.	Lower coverage limits.
Easy application process.	Narrow range of insurance types.
Financially stable company.	Mainly targets child insurance needs.

Globe Life Insurance

Since 1951, Globe Life Insurance has provided affordable life insurance for families, especially those with children. They offer term life, whole life, and burial & final expense policies without requiring a medical exam. A Globe Life policy typically costs $1 for the first month, but it increases in price after that.

The company’s financial strength is rated as strong, indicating a reliable ability to pay future claims. However, it’s important to note that Globe Life has received more customer complaints than other insurers of its size. When considering Globe Life for insurance needs, weighing the initial cost savings against the potential for increased rates over time and the company’s customer service record is crucial.

Globe Life Insurance Pros and Cons 

Pros	Cons
Easy application process.	Limited policy options.
No medical exam is required.	Higher premiums for older adults.
Affordable initial premiums.	Coverage amounts may be lower.
Policies for adults and children.	Rates can increase over time.
Quick coverage approval.	Benefits may decrease with age.

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Determining the Eligibility of Your Grandchild

Insurance companies know that children do not enjoy doctor’s appointments. As a result, they won’t request medical check-ups or dig into medical records.

Policies like these operate like burial insurance plans, with eligibility based on health-related questions.

Top 6 Reasons to Buy Life Insurance for Your Grandchildren

There are several reasons to purchase life insurance for your grandchildren, but let’s discuss the top 6.

Should you buy life insurance for grandchildren? That’s a good conversation with your family and adult children. There are many different factors to think about. 

Here are six reasons life insurance for grandchildren makes sense.

High Value at a Relatively Low Cost

Children are generally healthy and young, so getting affordable insurance coverage is easier. 

You’re guaranteed low-cost life insurance rates for life if you purchase whole life insurance now for your grandchildren. 

Note: The lower the premium will be when the child is young at purchase.

Long-term Security

Our insurability decreases as we age, so getting life insurance at a young age will ensure your grandson’s future. 

Having a chronic illness or disability can prevent your grandchild from getting affordable life insurance.

Steady Growth

A permanent life insurance policy will not only provide a death benefit but also earn cash value.

Here, How does a cash-value or permanent life insurance policy work?

• Life insurance policies with permanent cash values will grow with your grandchild. 
• You can borrow against this money later in life to pay for college, buy a house, or start a business. And in general, it’s tax-deferred.

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Financial Head Start

You’ve heard about people gifting life insurance to grandchildren as a gift. Life insurance doesn’t seem impressive to a kid.

Life insurance can last your grandchildren a lifetime, benefiting them long after you are gone. 

• According to a recent survey, seniors value financial security among the top ten things they value most.
• If you gift life insurance to your grandchildren, you are demonstrating financial responsibility and leaving a legacy for them.
• You can give a gift of life insurance to a child for the tax year of 2023 without having to pay any federal gift tax.

Provide Financial Support

Are you aware that 2.7 million grandparents in the U.S. serve as legal guardians to their grandchildren?

You can receive financial support from life insurance if you are the legal guardian of your grandchildren.

It is possible to offset treatment costs and avoid medical debt if your dependent becomes chronically ill with a life insurance policy.

Life insurance policies often offer accelerated benefits that can be useful during times of need.

The Unthinkable

Life is unpredictable, and unexpected things can and do happen to the ones we love. No one wants to believe that anything bad will ever happen to them. 

Be Prepared

Being prepared for life’s tragic moments is probably one of the best ways to handle them.

Financial protection can ease your emotional burden, even if it does not ease your emotional one.

Cover Final Expenses

Children’s deaths can be emotionally and financially devastating for parents.

The cost of final expenses can be a burden on the adult children of your grandchildren who have a life insurance policy.

Who Can Buy a Life Insurance Policy For a Child?

It’s usually parents or guardians who purchase life insurance for their children. If you’re a grandparent buying life insurance for a grandchild, you’ll need the child’s parent or guardian to sign off. 

It is important to note that to purchase life insurance for a minor, you must also have your policy. Most insurance companies will offer about 50% of the coverage of their parent or guardian’s policy.

For example, if your grandchild’s parent has a $100,000 life insurance policy but would like to give them a whole life policy, you would only be able to give them a $50,000 policy.

It is important to compare life insurance quotes and shop around since different insurers have different rules and restrictions.

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Advantages and Disadvantages of Buying Life Insurance for Grandchildren

You have the same views as parents as a grandparent – to love and protect your grandchild and prepare them for success in life. Life insurance is one way many grandparents ensure this since it can provide financial security and a legacy for their grandchildren.

If you need to become more familiar with the ins and outs of life insurance, you may find it discouraging. We have compiled a list of the advantages and disadvantages of buying life insurance for your grandchildren to help you weigh your options.

Advantages of Buying Life Insurance for Grandchildren

Bang For Your Buck

Buying life insurance at a young age can be more beneficial than buying it later. Children who are young and healthy tend to have a longer future than most, so they’re more likely to be insured at a lower rate. As we age, our insurability decreases. You can, therefore, get better coverage at a lower cost now than when your child becomes an adult.

Longevity and Consistency in Cash Value

A permanent life insurance policy, such as whole life, can earn cash value that can be used to pay for your grandchild’s college or to fund big purchases in the future.

Leaving a Legacy

Considering our older generation’s upbringing, financial stability is a popular gift for our youth. Seniors often use life insurance to teach financial stability and responsibility. A senior can also leave their benefits to a charity or church to leave a legacy.

Prepared For The Unthinkable

A life insurance policy can provide financial protection for your children in the event of a grandchild’s death early in life. Should your child pass away, protection against financial hardship can help ease their burden.

Disadvantages of Buying Life Insurance for Grandchildren

There is No Dependent for the Child to Care for

Life insurance primarily provides financial support for the family when someone dies, especially if the insured is the breadwinner. Since children are dependent on their parents, some might consider it irrelevant.

Savings Could cover Final Expenses

Having a healthy savings account and being financially stable could help parents cover their children’s funeral and burial costs. If the parents have a healthy savings account and are financially sound, they could use their savings to cover the funeral and burial costs.

Mortality Chances are Low

Due to children’s relatively low mortality risk, you may not need life insurance for traditional reasons like final expenses.

Insurance is not one-size-fits-all, so consider your priorities and desires for your family. Use a licensed insurance professional to help you navigate your options.

Benefits of Whole Life Insurance for Grandchild and Grandparent

It is beneficial both for you and for your grandchild to purchase whole life insurance on your grandchild.

Benefits for the Grandchild

As children grow up, they may develop a serious health condition or become obsessed with extreme sports, making them ineligible for or unable to afford life insurance. Buying whole life insurance will help ensure that they are protected for life.

Once the child reaches adulthood, you can transfer policy ownership to the child, who can change the beneficiary from you as the grandparent to their spouse as needed.

Benefits for the Grandparent

When you buy whole life insurance on your grandchild, you leave them a lasting legacy of protecting those they hold dear. Whole life insurance grows in value, unlike most gifts.

Moreover, it allows you to help financially in case the worst should happen and your grandchild dies.

Depending on the circumstances, you can access the policy’s cash value as an owner. In addition to taking dividends as cash, you can reduce premium payments or leave them in the policy to increase death benefits if it’s a participating whole life insurance policy. 

However, the policy can grow more rapidly without touching either the cash value or dividends and avoid termination risks.

Whole life insurance premiums are based on the age and health of the insured. Since the insured is a young child, premiums are moderate.

Other Ways to Financially Support Your Grandchildren

Depending on your goals and financial situation, you may only need whole life insurance for your grandchild. Here are some alternatives:

Open a College Fund for Your Grandchild

Speaking with an investment advisor before investing in a college fund for your grandchild would be best. There are two types of college funds: a 529 plan and an ESA (Education Savings Account).

Open an IRA for your Grandchild

Your grandchild can get a strong financial start by contributing to an IRA. An IRA can be contributed to little at a time, slowly building up to a large amount as your grandchild grows. You typically owe a 10% additional tax on the early distribution of your IRA if you withdraw it before you turn 5912 years old. 

If funds are used to pay for qualified higher education expenses in the year they are withdrawn from a traditional or Roth IRA, they may not incur the 10% additional tax. The tax and financial aid complications must be discussed with an investment advisor first.

Open an Account for Your Grandchild

Depending on the state, these custodial accounts are known as the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA). Your grandchildren can access These savings and investment accounts once they become legal adults. The custodial account can affect your grandson’s financial aid and have gift and income tax implications. Consult a financial advisor first.

Understand the Policy Details of Life Insurance for Grandchildren

There are some important details to understand and agree to regarding life insurance for grandchildren. These are:

Limitations

Income replacement is one of the most important factors when determining the face value of a life insurance policy.

There are limits on how much life insurance can be taken out on a child because they lack an income. 

• Many insurance carriers limit life insurance for children to $50,000 or $75,000.
• Insurance is generally evaluated on a case-by-case basis depending on the need and purpose demonstrated. 
• Benefits for children are often lower than those for adults because children have lower human life values or less earning power.

Requirements

What do you need to get life insurance for grandchildren?

Usually, grandparents only need to provide some basic information, for example:

• Social Security number and address of the child
• There are different requirements in each state, and some require the consent or signature of a parent. 
• It may be a good idea to ask a parent for permission before starting.

Medical Underwriting

Generally, a life insurance policy for grandchildren does not require much medical underwriting. 

• Children who are healthy and remain so are not required to undergo physical exams, but their parents or guardians may need to answer a few questions about the child’s health.

When you purchase life insurance for a child or grandchild, you also have the option to purchase more insurance in the future without having to produce proof of insurability.

Frequently Asked Questions

Can I get life insurance for my grandchild?

When you have the legal consent of the grandchild’s parents or legal guardians, you can purchase a life insurance policy on their behalf.

Why Would a Grandparent Buy Life Insurance on a Grandchild?

Whole life insurance coverage for a grandchild at a fixed premium rate and a savings account component may be attractive to grandparents because it provides life insurance coverage for the child’s entire life at a fixed premium rate. A grandchild can benefit from this savings account by borrowing against it.

Can Grandparents Get Life Insurance on Grandchildren Without Parental Permission?

The consent of a parent or legal guardian for a child’s life insurance policy is required. If you aren’t the child’s legal guardian, you must get their consent first. If you are the child’s legal guardian, you can consent on their behalf.

What Else Should I Consider When Purchasing Life Insurance for My Grandchild?

Life insurance policies for grandchildren should consider the following factors. In addition, Life insurance policies for grandchildren should consider the following factors:

• You must obtain the consent of your grandson’s parent or legal guardian to buy life insurance for him. Since your grandchildren are minors, their consent is not legally effective. 
• Ensure that your policy lets you choose how your premiums are paid. Some plans require lump sum payments, while others require ongoing payments.
• Take the time to review the return rates, surrender fees, and any other costs associated with the policy.