Should I Buy Life Insurance for My Kids?
- Jun 9
- 4 min read
Occasionally, we get questions on our online communities for doctors about buying life insurance for your kids. Sometimes, this is genuine curiosity, and other times it’s because a life insurance salesperson or financial adviser is trying to convince someone to buy life insurance for their children - perhaps because of a conflict of interest from premiums made. Below, we’ll cover when it makes sense to consider buying life insurance for your kids, and why in most cases it does not.
Disclosure/Disclaimer: Our content is for generalized educational purposes. While we try to ensure it is accurate and updated, we cannot guarantee it. We are not formal financial, legal, or tax professionals and do not provide individualized advice specific to your situation. You should consult these as appropriate and/or do your own due diligence before making decisions based on this page. To learn more, visit our disclaimers and disclosures.
Article Navigation
Who needs life insurance?
To establish the context for this article, it’s important to think about who typically needs life insurance. The people that should be considering buying life insurance are those that have people who depend on them financially, or whose life would change financially if they weren’t around anymore. Typically, life insurance is bought by doctors who want to protect the lifestyle of their:
Spouse
Children
Siblings
Parents
Other loved ones
Additionally, it’s important to remember that if your expenses would change if somebody passed away, you should also buy insurance for them to protect yourself from the financial hit. The typical example of this is the stay at home spouse who contributes to the family workload, as if they weren’t around, you may need to hire a nanny, cleaner, cook, tutor, and/or driver.
Related PSG resources:
By the way, if any of these applies to you and you haven’t purchased life insurance yet, please contact one of our insurance brokers for doctors, who have helped thousands in our communities to purchase insurance.
The thing to note here is that in most cases, unless your child brings in significant income, the conditions above don’t apply. Typically, a child has no income to replace, which is really the main purpose of life insurance for most people.
Reasons why (fiduciary) financial advisors typically advise against buying life insurance for your kids
While there are some predatory financial advisors out there, most fiduciary financial advisors would recommend against buying life insurance for your children except in very specific circumstances. This is because:
The amount you’ll pay in premiums over the lifetime of the policy will statistically far outweigh the amount of life insurance benefit your child will qualify for.
You’d historically do much better investing on behalf of your children (or yourself, for the benefit of your children) in the market with simple index funds over their lifetime than the amount of their benefit
Many policies sold to young children have a permanent life insurance component rather than term life insurance, which are usually expensive and come with heavy fees; again, this money would be far better off invested
What are some reasons people cite for buying life insurance for their children, and do they make sense?
Fear about future insurability
Especially if there is a reason to believe that your children won’t be insurable in the future (genetic disorder, family history, etc.), some physicians prefer to be cautious and lock in a policy for their children’s future dependents’ benefit.
Wanting to build the cash value component of a permanent life insurance policy
While this is often a reason touted by insurance salespeople or financial advisors looking to make money from selling the policy, the fact is that investing the money in the market will historically usually yield much higher value over time, even when the tax advantages of a permanent life insurance policy are taken into account.
Covering a child’s final expenses if something were to happen to them
Given that most physicians are financially stable enough that burial expenses would not be a significant burden, this usually doesn’t make sense as a reason to buy life insurance for physician families.
Estate planning and/or special needs situations
There are some situations in very high net worth families that this may make sense, but probably not if your only income is physician income. There are some estate planning reasons for special needs situations where life insurance may be used strategically though. If these situations apply to you, speak to an estate planning attorney (who doesn’t make money selling the policies, and if applicable, is well-versed in special needs situations) to see if life insurance may make sense for your situation.
Conclusion
There are very few situations in which it makes sense to buy life insurance for your children from a financial standpoint. Though some families may benefit from the psychological peace of mind or for estate planning reasons, it is usually better to invest that money over the long term, rather than pay life insurance premiums.
Additional life insurance resources for physicians
Sign up for our weekly newsletter for alerts about upcoming physician educational webinars and resources, and more.
Related PSG resources: