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Children's whole life insurance: Benefits & alternatives

Young father putting baby girl in car seat
Tony Anderson/Getty Images

Key takeaways

You can buy a whole life insurance policy for your child before they turn 18. As an adult, your child takes ownership and can keep coverage and benefits for the rest of their life.
Children's whole life insurance policy's premiums are relatively low and typically won't rise.
The policy's cash value is guaranteed to grow. Your child can use this resource throughout life to help meet their financial needs.

From your child's earliest moments, it's natural to start planning for their future—including taking steps to strengthen their financial security.

One tool that offers long-term benefits is children's whole life insurance. This solution provides financial protection well into adulthood plus a cash source your child can tap to cover crucial expenses.

What is children's whole life insurance?

Whole life insurance for children is a type of permanent life insurance you can get for a child while they're still younger than 18. As long as premiums are paid, the contract's coverage can continue throughout your child's life.

If your child passes away while the policy is active, it pays a death benefit. Whole life insurance also includes cash value, which is guaranteed to grow over time. That's a resource your child can access to meet financial needs later in life.

Typically, you own your child's whole life policy until they reach a certain age (usually between 18 and 25). At that point, depending on the terms of your contract, ownership may transfer to your child, who can take on the premiums and maintain the coverage for as long as they like.

The benefits of children's whole life insurance

As with other life insurance policies, children's whole life insurance has benefits that can help ease financial burdens during a difficult time. You might use its tax-free death benefit to cover funeral expenses or offset costs you incur while taking time to grieve.

Choosing whole life insurance for kids also provides five key benefits that may be important to you and your family.

1. Guaranteed insurability

Your child can keep their policy for their entire life regardless of health status or other factors. That can be especially valuable if they develop a medical condition or participate in high-risk jobs or hobbies.

2. Low premiums locked-in

Children's whole life premiums typically don't go up no matter how long your child has the coverage. Generally, the older someone is when they acquire life insurance, the higher their premiums will be. By buying a policy while your child is young, you can lock in a rate that's likely much lower than they'd get if they opened a comparable policy later in life.

3. Guaranteed cash value growth

Unlike term life insurance, whole life insurance includes a guaranteed cash value component. That means a portion of the premiums are invested for tax-deferred growth. As an adult, your child can take loans or withdrawals from that money,1 put it toward premium payments or cash out the policy entirely.

4. Potential dividend payments

Children's whole life insurance—like some stocks and other investment products—may pay regular dividends, which your child can save, spend, invest or use to pay premiums or increase their coverage.2

Learn more about Thrivent's dividend history

5. Flexible future financial resource

Once your child takes ownership of the insurance contract, they can use it to start building a stable financial future. They might keep the policy long-term, tap the cash value for expenses such as college tuition or the down payment on a house, or convert the policy to an annuity that will provide income during retirement.

Who should consider children's whole life insurance?

This solution may appeal to people whose financial plans stress stability, predictability and protection. These include:

  • Families with a history of health issues. If a medical condition runs in your family, you might want insurance your child can keep through adulthood—so they don't have to worry about being denied coverage later in life.
  • People who like guaranteed rates and returns. Lifelong, locked-in premiums are easy to budget around. And, the cash value of whole life insurance is guaranteed to grow.
  • Investors who want a balanced portfolio. If your other investments are closely tied to market activity, you might appreciate a whole life insurance policy's lower-risk approach to building cash value.

Alternatives to whole life insurance for children

Children's whole life insurance isn't for everyone. Premiums may not be budget-friendly during your child-raising years. And coverage may be lower than what your child will want as an adult. Some alternatives you might consider include:

Term life insurance

With term life insurance, premiums will likely be lower, but the coverage only lasts for a limited time before it expires. Plus, there's no cash value option. However, this option can be smart and affordable to start with and then convert to permanent life insurance if possible.

Investments with higher growth potential

A whole life policy's cash value growth may be limited by a low rate of return. You might instead open an IRA you can pass to your kids or a 529 qualified tuition plan they can use to cover college or other educational costs. These accounts often have market-based investment options that may gain more earnings in the long term.

Is children's whole life insurance right for you?

With benefits including cash value, locked-in rates and lifetime coverage, children's whole life insurance can help form the foundation of your child's financial future. If this tool sounds useful, consider connecting with a Thrivent financial advisor to discuss the pros and cons and decide whether it's a good fit for your family.

1 Loans and surrenders will decrease the death proceeds and the value available to pay insurance costs which may cause the contract to terminate without value. Surrenders may generate an income tax liability and charges may apply. A significant taxable event can occur if a contract terminates with outstanding debt. Contact your tax advisor for further details. Loaned values may accumulate at a lower rate than unloaned values.

2 Dividends are not guaranteed.

Offered through a brokerage arrangement with Thrivent Investment Management Inc. 529 college savings plans are not guaranteed or insured by the FDIC and may lose value. Consider the investment objectives, risks, charges, and expenses associated before investing. Read the issuers official statement carefully for additional information before investing. Investigate possible state tax benefits that may be available based on the state sponsor of the plan, the residency of the account owner, and the account beneficiary. Consult with a tax professional to analyze all tax implications prior to investing.

Contracts have exclusions, limitations and terms under which the benefits may be reduced, or the contract may be discontinued. For costs and complete details of coverage, contact your licensed insurance agent/producer.

Guarantees based on the financial strength and claims-paying ability of Thrivent.

Thrivent and its financial advisors and professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.

If requested, a licensed insurance agent/producer may contact you and financial solutions, including insurance may be solicited.