My Kids Don't Have Life Insurance. Here's Why

Does life insurance for children really make sense?

Life insurance provides very important protection. In my family, we have life insurance coverage for both myself and my husband. We do not, however, have life insurance for my two kids -- despite the fact we generally err on the side of buying a substantial amount of insurance coverage in order to protect our assets.

Not having policies in place for the kids isn't an oversight. We intentionally chose not to buy life insurance for either our son or our daughter. And that's because we do not believe purchasing this type of policy is a good investment.

Here's why we don't think life insurance for kids makes sense

Life insurance for kids can be purchased separately from a standalone insurer or it can be purchased as an add-on to a parent's policy. Typically, either parents or grandparents buy this coverage on their kids. This is different from a standard policy purchased by an adult since adults usually buy coverage on their own life to protect their family.

Typically, when a life insurance policy is purchased for kids, it's a whole life policy that is meant to remain in effect indefinitely. Parents can pay for the coverage until kids become adults, at which time they may take over covering premiums to keep the policy intact. And, like most whole life insurance plans, the policy may serve as an investment vehicle that acquires a cash value. Coverage also won't end as long as premiums are paid.

But there are a few issues that make us believe it's not worth purchasing this kind of coverage.

First and foremost, life insurance is meant to replace income that a deceased person was providing or valuable services that a deceased person was offering -- such as, for example, a stay-at-home mom who takes care of kids.

Our children, much as we love them, do not actually bring any money into our household or provide any services that we'd have to hire someone to do if something happened to them. In fact, they cost us money instead of bringing in money. As a result, there's no need to have coverage available to us to help us out financially if the worst were to occur.

Now, the idea of buying whole life insurance for kids is to help make certain they are insurable because the whole life coverage for kids can be purchased at a low price before they become adults -- and ideally before they develop pre-existing conditions. But this works only if the policy remains in effect for their entire childhood and if they opt to continue whole life coverage as adults. This is usually not the best move since term life policies are more affordable and offer all the coverage most people need.

Since we don't want to pay premiums for decades for a whole life policy that we don't need to protect our finances and that we don't think our son or daughter will want to keep as adults, there's no reason for us to buy life insurance for our kids.

Should you get life insurance for your kids?

Ultimately, for most people, buying life insurance for children may not be necessary. It doesn't necessarily hurt to have a small policy in place that could cover funeral costs if tragedy strikes, but buying a large whole life policy would make little sense for people who don't bring in income and who could buy their own more affordable term life coverage later on.

Of course, everyone needs to do what's right for their own family situation. But in many cases, others will also find, like we did, that buying life insurance for their kids just doesn't make good financial sense.