How Does a Child Rider for Life Insurance Work? 

Life insurance riders are add-ons that provide additional coverage and added protection against risks.

As a parent, one rider that you may want to look into during the life insurance buying process is the child rider. It provides a small payout if any of your children passes while your plan is active. 

Let's dive in to how it works.

What is child rider life insurance?

A child rider is an optional benefit that covers your children under your life insurance plan for a small additional fee. The rider covers all current and future children in your household, including biological children, stepchildren, and legally adopted children. It pays a small death if a child dies while the policy is in force. Both permanent life insurance and term life insurance offer child riders. 

The coverage amount for a child rider varies between providers, but it is usually not more than $25,000 per child. Though the death benefit is limited, it can help cover expenses such as funeral expenses, medical bills, counselling, and time off work. 

The cost of the rider usually remains the same regardless of the number of children covered under it. A child rider is considerably less expensive than purchasing a stand-alone life insurance plan for children.

How does child rider life insurance work?

Here’s how child rider works: 

• When you buy a term life insurance or whole life insurance policy, you’ll have the option to add a child rider to it
• Most insurance companies allow parents age 18 to 65 to buy a child rider, though some providers may have a higher minimum age and lower maximum age
• The rider covers all the children in your household (biological children, adopted children, and stepchildren). Any children you have after the policy issue date will be automatically covered without any increase in the premium rate.
• A child rider involves little to no underwriting, so your child will not have to undergo a medical exam. However, some insurers may ask basic health-related questions. If your child has a pre-existing condition, the rider will not cover it.  
• Child rider coverage kicks in once the child is 15 days old. Coverage lasts until your child reaches age 18 or 25, or until you reach age 65, depending on the insurer. Given the temporary nature of the coverage, a child rider is also referred as a child term rider. No underwriting is required to convert a child rider to a stand-alone policy. 
• Typically, you have the option to convert the rider to a permanent life insurance plan once it expires. The maximum death benefit you can purchase is five times the rider amount. If your child rider provides $10,000 in coverage, you may be able to buy a $50,000 permanent life insurance plan for your child. 

Pros and Cons of child rider life insurance

Like with other riders, the child term rider has its pros and cons. Knowing about them can help you objectively decide if you need it. 

Pros

• Affordable coverage: A child rider offers you a cost-effective way to buy life insurance cover for your children. 
• Guaranteed insurability: If you have a permanent life insurance policy, you will likely have the option to convert it to a stand-alone policy before the rider term expires. The conversion option ensures your child will have life insurance protection for life, even if they develop health problems later in life that might disqualify them for standard life insurance. 
• Financial protection: If the unthinkable happens, the rider can provide financial assistance to help cover final expenses, medical expenses, and loss of pay due to extended time off. 

Cons

• Small payout: Coverage amounts available with child riders are relatively low, which may not be adequate for your needs. 
• Temporary coverage: Typically, child riders provide coverage until a child turns 25. After which the child need to buy a separate policy or convert the rider to a permanent life insurance plan. 
• The conversion option can be pricey: Converting a child rider to a separate policy requires no underwriting. Because of this, insurers issue the new plan at standard rates. Healthy people have a good chance of a receiving super-preferred or preferred rating (and consequently lower premiums) if they apply for a standard policy. 

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How Much Does Child Rider Life Insurance Cost?

A child rider will likely cost you $4.25 to $7.5 per $1000 of coverage per year. For instance, if your rate is $4.5 per $1000 of coverage and you buy a child rider with a death benefit of $20,000, you’ll pay $90 a year or $7.5 a month.  

Other Common Life Insurance Riders

Child term rider is not the only optional benefit offered by insurers. Other popular life insurance riders are: 

Guaranteed Insurability Rider

Life insurance needs are not set in stone. As your life changes, your life insurance needs may change too. This is where a guaranteed insurability rider comes into play. It lets you buy additional insurance coverage without new underwriting. 

You will still pay a higher premium for the additional coverage. However, this increase will be based on your age and health at the time of purchase of the original policy, not on your current age and new health concerns. 

Depending on your policy’s terms, you can purchase additional insurance at specific dates in the future — like after 3 or 5 years — or following a qualifying life event. Common life events after which you can purchase additional coverage include getting married or having a baby. 

A guaranteed insurability rider may also let you renew your base policy at the end of its policy term without taking a new medical exam. The rider is a good option for those who think they may want to provide more for their beneficiaries in the future or want the freedom to renew their term life insurance plan without additional underwriting. 

Accidental Death Rider

An accidental death rider pays out an extra sum of money, over and above the basic sum assured, if the insured dies in an accident. Accidents covered by the rider may include workplace accidents, car crashes, fires, accidents involving firearms, and falls. Accidents that are excluded may vary from one provider to another. But the list usually includes alcohol and drug related accidents and accidents that occur while participating in hazardous activities.

Keep in mind approval is not guaranteed. For example, if you have a dangerous job, some insurers may refuse to offer you the accidental death rider. 

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Waiver of Premium Rider

If you’re like most people, you are probably buying life insurance to create a financial safety net for your family. But what if something unpleasant happens, like you become disabled and can’t work? A waiver of premium rider can ensure you get to keep the insurance coverage even while you’re unable to make premium payments, though conditions apply. 

The rider doesn’t cover disabilities caused by pre-existing conditions. In addition, the rider kicks in only if you become totally disabled and survive the waiting period. The definition of total disability varies by insurance company, but it is broadly defined as a condition, physical or mental, that prevents you from earning a living. The waiting period in most cases is six months. 

You must continue paying premiums until the end of the waiting period to prevent the policy from lapsing. Most providers, however, will refund the premiums paid during this period once your claim is approved. Your premiums are covered as long as your disability lasts. You’ll need to start paying premiums once your disability ends. 

Family income benefit rider

A family income benefit rider provides a regular monthly income to your beneficiaries in addition to the base death benefit. This rider is designed to replace the insured’s monthly income and comes at an additional cost. The monthly income is typically paid for a specific period following the insured death. A family income rider may be worth considering if you are a sole breadwinner of your family. 

Accelerated death benefit rider

You may think the only purpose of life insurance is to provide a payout when someone passes. However, in certain situations it can also offer a payout to the insured while they’re still living. These payouts are commonly referred as living benefits. An accelerated death benefit rider allows you to receive part of the sum assured while you’re still alive. 

Generally, you must be diagnosed with a terminal or chronic illness to qualify to for this benefit. Most life insurance offer an accelerated death benefit for terminal illness at no charge. An accelerated death benefit for chronic illness is usually offered as a rider. Some insurance carriers provide it an additional cost, but some offer it for free. Read your policy document to check whether it includes accelerated benefits for chronic illness or terminal illness or both. 

To access an accelerated death benefit for terminal illness you must be diagnosed with a terminal illness and have a life expectancy of 12 to 24 months. 

To access an accelerated death benefit for chronic illness you must be diagnosed with a chronic illness that prevents you from performing at least two of the six activities of daily living (ADLs). ADLs include dressing, eating, bathing, transferring (getting in and out of bed), and continence.  

Long-Term Care (LTC) Rider

A long-term care rider is an optional benefit that gives you access to a portion of your death benefit if you need long-term care. The rider is generally available only with permanent life insurance policies. To be eligible for it, a medical professional needs to certify that you can’t perform two or more activities of daily living on your own. The benefits become payable only after the waiting period — typically 90 days — is completed following a medical diagnosis.

With most insurance companies, the LTC benefits are limited to 70%-80% of the sum assured, paid out monthly. Once your claim is approved, you’ll receive a certain percentage of the benefits (usually between 1% and 3%) each month until the maximum amount has been paid. 

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Conclusion

A child rider can help grieving parents cover funeral and other expenses. It is an affordable way to buy life insurance cover for your children. In many cases, there’s an option to convert the rider into permanent life insurance in the future. But keep in mind you can typically add this rider to your policy only at the time of its purchase. If you are looking affordable life insurance coverage, Dundas Life can help you. We work with some of the top insurers in Canada and can help you compare their quotes, so you can get the best deal. Book a call with us.

Frequently Asked Questions (FAQs)

What happens when a child term rider expires?

As your child term rider approaches its expiry date, you can either let the coverage end or convert it into a stand-alone life insurance policy. 

What is the difference between Child Term Rider, Child Term Life Insurance and Child Whole Life Insurance?

A child term rider is an additional benefit which parents can add to their term life insurance or permanent life insurance policy at an additional cost. The rider provides a small payout in the event your child dies while the policy is in force. The payout is meant to help you pay funeral expenses and medical expenses, though you can use it in any way you like. 

Child term life insurance is much like adult term life insurance. This means it covers your child for a limited period. Death benefits, however, are lower than adult term life insurance and premiums more affordable. 

Child whole life insurance provides permanent life insurance coverage for your child and accumulates cash value tax deferred. Premiums are guaranteed, meaning they won’t increase over time. Since premiums for life insurance always increase with age, the younger your child is when you purchase a plan, the lower the premiums. By buying buying life insurance early in your child’s life, you can lock in reduced premiums and potentially save thousands of dollars over the life of the plan. You can transfer the ownership of the policy to your child at any time once she reaches the age of majority. 

What are the application process and requirements?

If you want to add the child rider to your life insurance policy, simply mention the same on the application. With most insurers, you can select the rider only at the time of buying your policy. Only a few carries allow policyholders to add a child rider after the purchase. 

Most carriers require the policyholder to be between age 18 and 65 to a child rider to their policy. However, some insurers only allow adults age 20 to 55 to purchase the rider. Check with the insurer what the age requirements are before submitting the life insurance application. 

Can you get child rider life insurance for Adopted children?

Yes, you can purchase a child rider to cover your adopted children. The rider covers all your existing and future children.