Most children don't need life insurance — here are a financial planner's 3 moves to set them up for success instead  

Buying life insurance is a financial planning rite of passage for many adults. But do you need to buy a policy for your children?

"Rarely would we ever see a need for a child to have a life insurance policy," says Eddy Jurgielewicz, a certified financial planner with Facet, an investment advisory service. "Life insurance is, first and foremost, intended to provide that financial protection for someone who others financially depend on."

Life insurance for children does have some benefits, including guaranteeing their future insurability and locking in lower premiums for the future.

Here's what parents and grandparents need to know about life insurance for children, including when it makes sense and alternative ways to ensure your young one's financial future.  

• What to know about life insurance for children
• Three steps parents can take to help their children financially 
• Bottom line  

There are two main ways life insurance for children can be purchased, either as a standalone policy—typically as whole life insurance—or as a rider on a parent's policy. Riders usually cover the child until they reach a certain age, then give them the option to get their own policy.

There are several reasons people buy life insurance for their kids.

• It guarantees future insurability. Certain health conditions and occupations can make it harder to get life insurance as an adult. Children's life insurance policies typically allow the insured minor to get coverage as they mature, regardless of these factors.
  
• It can help make premiums more affordable in the future. Getting life insurance for a child can lock in a low premium for life, helping make a policy easier for them to pay for as an adult.

• It can cover funeral expenses. If the worst happens, it could give a parent peace of mind to know that they'll be able to cover the costs and take time away from work to grieve.

However, there are also drawbacks to getting a child a life insurance policy.

• It's a permanent cost. To keep the policy in force, you — or the child — will likely need to continue to pay the premium on the life insurance policy.
  
• It may be a limited policy. Many children's life insurance policies are small, with less than $100,000 of coverage. They'll likely need more coverage when they're older and have dependents of their own to protect.

If you feel that life insurance for your child is important, several of our top picks offer coverage for children as young as 14 days old.

Mutual of Omaha Children's Whole Life Insurance offers coverage for up to $50,000 with just three health questions, and the opportunity to add more coverage later in life.

American Family DreamSecure Children's Whole Life Insurance offers higher limits than many other policies we reviewed, with coverage options up to $75,000.

According to Jurgielewicz, there are several things parents can do to provide for their children that don't involve buying them a life insurance policy.  

Check your own coverage  

"Certainly the most important thing is making sure that the parents have the appropriate coverage in place," Jurgielewicz says.  

While there are several ways to determine how much life insurance you need, one common method is multiplying your gross annual income by 10. A person making $100,000 a year, therefore, would need $1 million in coverage. 

Another formula for determining adequate coverage is the DIME method. Add up:  

• Debts you'd leave behind 
• Income multiplied by the number of years you think your family would need support 
• Mortgage expenses 
• Education costs for your children  

Shopping for a life insurance policy or increasing your coverage can be complicated, but we've done the research for you. One of our favorite providers is Guardian Life Insurance, for its high financial strength ratings and flexible term life policies.

We also like Northwestern Mutual for its long history, excellent financial strength ratings and variety of the products it offers.  

Establish an emergency fund  

Having ready cash is critical to protect your family financially when the unexpected happens, Jurgielewicz says. While many experts recommend keeping three to six months' worth of expenses in reserve, any amount you can quickly tap into is helpful.  

A high-yield savings account (HYSA) is a great place to build an emergency fund since it grows more quickly than a typical savings account. Some HYSA are even offering 5% annual percentage yields (APY).  

We recommend LendingClub's High-Yield Savings for its high APY and because it doesn't have any monthly fees or minimum deposits.  

UFB Secure Savings accounts also offer a high APY and no monthly fees or minimum deposits. In addition, depositors can withdraw funds from 91,000 ATMs across the US without paying a fee.

Invest for college  

With the already high cost of college increasing every year, education can be a huge expense for families.

"When it comes to protecting kids, one of the best things parents can do is make sure that they've got a good plan in place to save for college," says Jurgielewicz. "There are a lot of other really advantageous accounts to consider that will certainly fill a need far greater than potentially looking at life insurance for the child."  

One way to save for higher education is a 529 plan, a state-sponsored investing account that can be used for education expenses tax-free. Beyond tuition, it can cover fees, books, supplies, room and board and other school-related costs. Anyone can start a 529 plan, making it a great option for grandparents and other family members or loved ones who want to support a child's future.  

One of CNBC Select's top picks for 529 plans is my529 (Utah). This policy is available to residents of any state and allows you to invest in age-specific portfolios that rebalance as your child gets older.

A Bright Start College Savings Program (Illinois) is a good option for those searching for low fees and no minimum requirements. Illinois residents get certain tax deductions, but there are no state residency conditions.

There are some benefits to buying a life insurance policy for a child, but it may not be the best way to protect your family. Parents should revisit their own policies, grow their emergency fund and make investments that can help pay for their children's education. 

At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Eddy Jurgielewicz, a financial planner at Facet.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every life insurance review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of life insurance products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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