What Happens to Child Life Insurance When They Turn 18 or 21?

Understanding Life Insurance for Kids

What Is Life Insurance for Kids?

Life insurance for children is a policy that provides a death benefit if the insured child passes away. These are usually whole life insurance policies, meaning they offer lifelong coverage and build cash value over time. Parents or grandparents often purchase them to lock in insurability and create a foundation of financial protection for the child’s future.

Benefits of Child Life Insurance

• Locked-in low premiums that never increase.
• Guaranteed insurability even if health issues arise later in life.
• Cash value growth that can be borrowed against for college, a first home, or emergencies.

Transition at Age 18 or 21

What Happens to the Policy?

When the child becomes an adult (18 or 21 depending on the policy), the coverage does not end—it transfers ownership. The young adult now takes control of the policy and must decide how to manage it.

Options for the Policyholder

1. Maintain the Policy – Continue paying premiums, keep lifelong coverage, and grow the cash value.
2. Convert the Policy – Some allow conversion into larger permanent life insurance without a medical exam.
3. Cash Out the Policy – Withdraw the accumulated cash value, but coverage ends.

Considerations for Parents and Young Adults

• Have the conversation early. Discuss the policy before your child turns 18 or 21.
• Teach financial literacy. Show them how the policy can fit into long-term planning.
• Weigh the options carefully. Coverage, conversion, or cashing out all carry unique benefits and consequences.

Benefits of Continuing the Policy

Financial Security

The death benefit provides a safety net, covering expenses in case of tragedy.

Building Cash Value

The longer the policy stays active, the more cash value it builds—useful for education, housing, or business ventures.

Locking in Insurability

If health problems occur later, having an active policy protects against expensive or denied coverage.

Making an Informed Decision

• Assess Financial Needs: Look at debts, savings, and goals before deciding.
• Seek Professional Advice: An insurance advisor can explain options clearly.
• Communicate the Decision: Notify the insurer and keep all paperwork updated.

Conclusion

Child life insurance is more than just protection—it’s a financial foundation. At 18 or 21, young adults have the choice to continue, convert, or cash out their policy. With guidance and planning, families can ensure the decision aligns with long-term financial security.

By understanding these options, you can help your child step into adulthood with confidence and stability.