For a parent, the goal of purchasing life insurance is to create financial protection for your family. A well-planned policy can help your family pay off debts and loans, pay down mortgages, and even contribute to your children’s futures. However, coverage for teenagers is a little different.
Teenagers do not (often) carry a parent’s level of financial responsibility. Even so, there are practical—and financial—reasons to consider life insurance for teenagers. Below, we discuss those reasons as well as coverage options and costs.
Why Should I Buy Life Insurance for My Teenager?
One very common reason to purchase life insurance for teenagers is called “guaranteed insurability.” Guaranteed insurability is an option on permanent life insurance policies. It allows a covered individual to purchase additional coverage without having to prove health status again. The amount of coverage that can be added, and at which intervals in time, are specified in the specific life insurance policy.
So what happens when you purchase life insurance for your teen now, while they are young and healthy? Their premium will start low and remain low throughout their coverage. Additionally, they can add more coverage to their plan as they get older without having to update their health status. So if they develop a health condition, their ability to get life insurance won’t become a concern. They will have the option of maintaining their current policy as they age, adding to it as their life progresses.
Medical and Funeral Expenses
Medical and funeral expenses are conventional reasons to purchase life insurance for teenagers. An unexpected loss, independent of age, can be a financial burden. The average funeral costs around $8,000-$10,000. And that doesn’t factor in any medical costs that accrue before a loved one passes away.
When it’s time to send your teen off to college, student loans can be the first big financial decision you teach your child how to make and manage. It’s important to remember that not all student loans are treated equally if your student passes away before paying them back.
- Federal student loans are “discharged” if the borrower passes away. After proof of death, the student loan debt is written off.
- Private student loans do not have to discharge loans if the borrower passes away. If whoever has taken out a loan dies, the debt will be collected from their estate. If there isn’t an estate, the debt will be collected from the student’s co-signers or a spouse.
If your family decides that a private student loan is right for you, it’s a good idea to consider adding the sum of that loan to your teenager’s life insurance policy.
Time to Recover and Grief Counseling
The loss of a young family member can be devastating for everyone. Parents may want to take extra time off work before they feel comfortable returning. If that time isn’t paid leave, you or your spouse may be put in a difficult position—go back to work before you are ready, or experience a drop in your regular income. Additionally, the entire family could benefit from some level of grief counseling. These costs can add up/However, for a family working through loss, having the tools needed to move forward can be priceless. A well-planned teen life insurance policy can help you afford both time off work and grief counseling.
What Type of Life Insurance Will Cover My Teen?
All types of life insurance policies will cover a teen. That doesn’t mean every life insurance company will agree to sell life insurance for your teenager. However, you have a host of options to choose from, including a child rider, a term policy, and a permanent policy.
A child rider is an addition you can make to your existing life insurance policy. It provides a death benefit if one of the children covered on the rider dies. However, a child rider does not continue indefinitely. Once your teenager reaches a specified age, you and your teen will have a decision to make. You can either convert the child rider into a permanent life insurance policy or let the coverage end. If you are unsure about life insurance for teenagers, a child rider is a good place to start.
A term policy is an individual life insurance policy, not an addition to an existing plan. Term life insurance policies provide coverage for a specific amount of time (usually 5 to 30 years). The plans can be renewed after that time has ended, but health may be assessed, and premiums may then increase. Term policies tend to be less expensive than permanent life insurance, and the cost-to-coverage ratio is good for those who are not concerned about guaranteed insurability.
If your main purpose in buying life insurance for a teenager is guaranteed insurability, consider a permanent life insurance policy. Permanent life insurance is designed to stay with an individual permanently. There are not specified allotments of time when the plan will need to be renewed or re-evaluated. As long as premiums are paid, the policy stays in effect. Permanent policies technically have a “maturity age” (usually around 95 or 100 years old), meaning they will end when you reach that age. Whole and universal are two popular types of permanent life insurance.
How Much Life Insurance Should I Get for My Teenager?
The amount of life insurance you choose depends on what you want out of it and your budget. A higher death benefit (the amount a beneficiary receives after the insured person has passed) will be more expensive. So after you consider your needs with your family, you will also have to decide how much you can afford to pay in life insurance premiums.
At minimum, any life insurance for a teenager should cover for the cost of a funeral. Because the average funeral costs around $8,000 to $10,000, aim for a plan that will cover at least that amount. Anything above that amount can be useful for your family as long as you can comfortably afford the premiums.
How Much Does Life Insurance for Teenagers Cost?
The cost of a life insurance policy will depend on several factors, including the type of plan, amount of death benefit, and insurance company you choose. For example:
- A child rider can cost $5 to $7 for every $1,000 in death benefits.
- A 20-year term policy can cost $12 each month for $250,000 in death benefits.
- A permanent policy can cost $176 each month for $250,000 in death benefits.
Purchasing life insurance for a teenager is no small choice. If you would like guidance before making a final decision, please call us at (800) 917-4169. Or, if you would like to schedule an appointment to get advice one on one, you can find an agent near you.