Whole Life Insurance for Grandchildren

Key Takeaway

Grandparents can purchase whole life insurance for their grandchildren to help generate a financial cushion for the future and contribute to a grandchild's education or first house purchase.

Photo of grandfather lifting grandchild in air, whole life for grandchildren

Whole life insurance provides permanent coverage as long as premiums are paid, with some policies having dual features such as a confirmed death benefit payable to the named beneficiary when the insured person passes away as well as a cash value that enables the holder to accrue interest on their contributions.

Life insurance solutions education resources may indicate that it could be expensive or difficult for an older person to purchase whole life coverage due to their life stage, just as whole life insurance for pre-existing conditions can potentially be more costly. However, a grandparent should normally not have a problem purchasing a whole life insurance policy for a healthy grandchild.

As a lasting gift, the permanency of the policy could ensure the coverage can remain valid for the grandchild’s whole life, provided the premiums were maintained. This may act as a way to plan for the future–as long as the grandparent is the child's guardian or has consent from the parent.

Why Would a Grandparent Purchase Life Insurance for a Grandchild?

People may often think of life insurance primarily as a policy that pays out a death benefit when the insured person dies. However, whole life coverage can provide other benefits, depending on the policy features and conditions.

Some of those advantages can include:

  • Purchasing whole life insurance coverage as financial protection for the family
  • Treating the insurance as a route to accumulate contributions and accrue interest earnings in a tax-advantaged way
  • Helping to teach grandchildren about the value of saving and earning interest
  • Helping provide options where a grandchild may be able to access the account value within the policy

The policy owner of a whole life insurance policy does not necessarily need to be the insured party. Instead, the policy owner is responsible for making the agreed premium payments and providing the necessary information to their insurance provider during the application process.

By making the premium payments on time, the policy owner/grandparent can ensure the whole life insurance policy remains active and well maintained. The beneficiary must be a named individual such as a parent or sibling or potentially a trust if the child is still very young.

Finally, the insured party in this illustration is the grandchild. While the grandparent will anticipate their grandchild living a long and healthy life, it may be more affordable and accessible to insure a younger person than the grandparent, with the account value component intended for the grandchild's benefit.

Whole Life Insurance Versus Term Insurance for Grandchildren

There are multiple types of insurance coverage, and the policies most suited to one person may be less appropriate for another. For instance, if you are considering purchasing life insurance for small business employees, the policy best aligned with your objectives may differ greatly from that most relevant to a grandparent.

In our experience, grandparents looking for a life insurance policy for a grandchild typically compare term and whole life coverage. Term life insurance runs for a specified period, normally in increments. For example, this insurance policy might last for up to thirty years. A grandparent purchasing a term life insurance policy should consider that the policy may expire without holding a value, assuming the grandchild will live much longer than the term covered.

Some carriers may not offer term life insurance policies on minors, and the financial benefits may be limited, albeit with generally lower premiums. Whole life may be more suitable since the coverage will remain in effect for the entire life of the grandchild as long as the premiums are paid. The account value element of the policy can accrue interest earnings over time, providing the grandchild with a source of funds for their future use.

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The information above is for educational use only and does not represent insurance, tax or legal advice. It is not a recommendation or solicitation to buy insurance. Please talk to your licensed insurance agent for more information about life insurance and your needs. Please consult with the appropriate professional for tax or legal advice. Guarantees are backed by the claims-paying ability of the issuing insurance company.

Article Author: Meredith Bell
Author Bio: Meredith joined Everly in 2022 and has 20+ years of experience in the life insurance industry. She has held various roles in advertising, marketing, communications, sales and distribution support, and product development. Outside of the office, Meredith lives with her daughter Kennedy and their dog Mavis. Meredith enjoys cooking, camping, gardening, hiking, and bourbon (though not always at the same time). She is a live music enthusiast and an avid reader. Her favorite quote is by Thomas Jefferson: "I cannot live without books." Meredith agrees, but would add cheese, movies, and dogs to that list.

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