Taking out life insurance for your child or children can feel like the most unnatural thing in the world - but it can actually be a lifeline in a worst-case scenario.

The death of a child can seem unimaginable, yet research from the Royal College of Paediatrics and Child Health shows that more than 5,000 children in the UK die each year. More than half of these deaths occur in babies under the age of one, while cancer, other illnesses and accidents account for the majority of deaths of one to 19 year olds.

While we understand it might seem as though a life insurance payout would be profiting from the death of a beloved child, having a lump sum at this time can allow you to stay in the family home and focus on other children or family members. It’s an emotional subject, but here we set out why life cover for children might be right for your family.

What is life insurance for children?

Life insurance for children pays out a tax-free lump sum in the event of a child or children dying. The sum goes to named beneficiaries - usually the parents - and can be used in whichever way they think suitable. Many parents use the money to meet funeral expenses or to pay the mortgage or rent and the bills while they take time away from work.

Life cover for children applies to biological, legally adopted and step children. Some life insurance policies cover children from the day of their birth, while others start once your baby is 30 days old. The age that the child is covered until can vary from 16 to 23, although most policies cover a child until the age of 18 or, if he or she is in full-time education, 21.

What types of child life insurance policies are there?

There are three main types of child life insurance. Set term life cover runs for a defined period, usually of between five and 10 years, and ends when the child reaches the specified age.

Life assurance - also known as whole of life insurance - lasts from childhood into adulthood and until death. However, this type of life cover for children is very expensive and, as with set term life insurance for children, is very rare.

The majority of child life cover policies, therefore, come in the form of an add-on or a ‘rider’ on a life insurance for parents policy. This can apply to single or joint life cover.

How does life insurance for children work?

Each child is insured for a defined sum, which is usually a smaller amount than that covering any adults named on the policy. A payout can be made for each child (unlike joint life insurance for couples, which pays out only on the first death). 

Life insurance for children is designed to give you breathing space at the time you need it. If you have to face the death of a child, you will need as much stability as possible in the following months and years. The lump sum payout enables parents to focus on each other and their surviving children, instead of worrying about how to pay the bills.

Is child life insurance the same as family income benefit?

No, they are different types of life insurance. Family income benefit is a type of term life insurance, but one which pays a monthly income, rather than a lump sum, to your loved ones following your death. 

Income life insurance is rare and only pays out for the remainder of the term; for example, if you died 18 years into a 20-year policy, the monthly income would only be paid for the remaining two years.

What else do I need to know about life cover for children?

As with all insurance policies, you have to be honest when you compare life cover quotes online and fill in the forms. This includes disclosing any family illness or hereditary conditions, otherwise you could risk invalidating your policy.

When your son or daughter reaches the maximum age set out in the policy terms, it’s a good time to think about taking out life insurance for young people in their own name. They might assume they won’t need it in their late teens or early 20s but, the lower the age at which a policy starts, the cheaper the premiums tend to be for life.

Critical illness cover for children

Critical illness insurance pays out a lump sum if a person named on the policy is diagnosed with a serious illness or chronic condition. As with life cover, it is very difficult to get stand-alone critical illness cover for a child, with children commonly added to a parent’s policy instead.

Many critical illness cover policies include children as standard, or they can be added to your existing policy for a small extra monthly cost. Similarly, family health insurance gives you peace of mind that you, your partner and children will get the care and treatment you need should you become unwell or be involved in an accident.