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Insurance Plans for Kids

Adults usually take out insurance policies for themselves, but they also have the option of getting child-only insurance policies for their kids. Many major insurance companies offer these policies. Whether the insurance policies designed for children are worth it is a matter of debate. Ultimately, whether you buy one will depend on your individual circumstances.

  1. How Insurance Plans for Kids Work

    • Insurance plans for children operate exactly the same way as plans for adults. You must go through the same claims process you would under a regular policy. With a child insurance policy, however, usually the beneficiary of the policy isn't the person who pays the premiums. This is simply because children aren't making an income that would allow them to make the payments. Consequently, usually caregivers and parents handle the expense and requirements of filing claims. Caregivers and parents also handle the policy because, under the laws for most states, children can't sign contracts except for "necessities of life."

    Benefits

    • A major benefit to having a child-only insurance policy is that your insurance is not tied in with your child's. This can be a good thing if your insurance has limitations, as your child's policy will prevent your child from depleting the amount left for coverage. It also may be a good idea in situations where a parent or caregiver doesn't have legal custody of a child and therefore may not be able to add the child to an existing policy. Another benefit is that some policies may accrue cash value, which you can use to teach your child about budgeting and investment.

    Disadvantages

    • Insurance plans for kids usually don't cover very much--the average amount on a child insurance policy is only $5,000 as of, according to Pat Curry of the Bankrate website. Adults easily could tack this amount onto an existing policy, which most people do. Additionally, the amount of people with child-only policies is low--Curry reports only about 15 percent of people under age 18 have life insurance, for instance. This may make it harder to find an insurance agent who is qualified to set up a policy for you and keep it updated as you go through life changes.

    Purchase

    • Most people purchase child-only insurance policies when the child is very young, often in the first year of the child's life. They often buy coverage when they have recently assessed their finances.

    Considerations

    • Due to modifications in insurance law initiated by the Obama administration, some insurance providers are opting not to offer child-only insurance policies as of 2010, as reported by Duke Helfand of the Los Angeles Times. The companies claim that the new regulations would permit parents to buy policies for children who already are ill, which would deplete a company's funds through increased claims. The decision to stop offering these policies thus is a simple matter of profit margin to the companies who have eliminated the plans. Additionally, although some insurance plans for children may afford some financial benefits like cash value, they generally do not provide enough benefits to be considered worthwhile investments--there are other coverage and investment options available, and child policies also sometimes assume the child won't be able to buy coverage for himself later in life, which simply isn't true in most cases.

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