Children’s Whole Life Insurance is a commonly purchased life insurance product. Parents and grandparents can buy these policies on their minor children and grandchildren.
There are many reasons why parents and grandparents may choose to buy a child’s whole life insurance policy. Some benefits of buying children’s whole life insurance include:
- Locking in a low premium
- Guaranteeing life insurance coverage for the child no matter what health issues may occur
- Option to purchase more coverage later in the child’s life
- Accumulating cash value that grows with the child
These policies typically don’t have large face amounts. They often range from $5,000 to $50,000 in coverage, but if the worst should happen and a child dies far too young, the death benefit can help the parent pay for a funeral and other expenses.
In most cases, thankfully, children grow into healthy adults and proceed to live long lives. But this doesn’t mean the policy now has no purpose. Children’s whole life insurance is a permanent product which means it will provide coverage until the insured dies, no matter when that is, as long as the premiums keep getting paid.
We get the following question from many of these insured children who have now grown up:
Is the policy my parent bought on me when I was young now mine?
The simple answer is no. Although there are a few companies that offer products that do become the child’s asset at age 21, most policies bought on children do not automatically transfer ownership.
These policies are owned by the parent/grandparent. Policyowners have control over the policy. Although the child may be the person who is insured, the child does not have legal rights to the policy, even as adults.
Policyowners can transfer ownership to the adult child if they choose to do so. But they don’t have to.
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Parent Owners Can Transfer Ownership (if they want to)
Policyowners can transfer ownership to the adult child if they choose to do so. In fact, this is a popular decision. When the adult child grows up and has a family of their own, this small whole life insurance policy purchased on them when they were young has accumulated cash value. These funds can be accessed through policy loans and withdrawal or surrenders.
But parent/grandparent policyowners are under no obligation to transfer ownership, even if the adult child requests it. As owners, they have unfettered access to the cash value and can use it however they wish. The parent or grandparent sometimes will simply opt to surrender (terminate) the policy and receive the surrender value in cash.
If your parent or grandparent owns a policy on you and you prefer to be the owner, you can offer to buy it from them. Offer what the policy is worth in exchange for transferring ownership. But, again, they aren’t required to accept the offer.
Parent Owners Can Change Beneficiaries (if they want to)
In lieu of transferring ownership, some parent/grandparent owners may also choose to just change the beneficiary. But we don’t recommend this course of action. Here’s why.
The typical scenario: If a parent/grandparent buys a life insurance policy on their minor child, they are likely the beneficiary as well. When this child grows up and has a family of their own, some parent owners may choose to change the beneficiary to the child’s spouse as a gesture of love. With this setup, they still own and have control over the policy. They still pay the premiums. If they want to access the cash value account, they can, but the death benefit goes to the child’s spouse when the child dies.
The problem with this scenario: when a life insurance policy has three different people named as owner, insured, and beneficiary, this creates a tax issue. When the insured dies, the owner is essentially gifting the death benefit proceeds to the beneficiary. In normal circumstances, a death benefit is paid tax-free, but not when it’s a gift in the eyes of the government.
If a parent wants the child’s family to receive the death benefit, it’s best to just transfer ownership to avoid the death benefit becoming taxable.
In conclusion, children whole life insurance policies are purchased out of love and protection. There is no reason to feel uneasy, but open a dialogue with your parent/grandparent if you’re concerned about this policy on you. If discussing with them isn’t an option and you’re truly troubled that someone else has a policy on you that you don’t have control over, contact your local insurance commissioner for assistance. You can find contact information for the commissioner’s office in the state you live in here: NAIC.org.
About the writer
Natasha Cornelius
Marketing Content Manager
Natasha is a writer and content editor at Quotacy. She is also co-host of Quotacy’s YouTube series. She can't get enough of life insurance and outside of work is also working toward her Chartered Life Underwriter designation. Connect with her on LinkedIn.
hi my mom whom lives in alabama i live in texas for the past 10 years has had a prudential whole life policy on me now since i was probably 4 or 5 maybe since i was born not sure but anyways i was living in ohio bout to give birth to my last child who is now going to be 21 in june and my mother calls me and says i need to meet with her/mine insurance guy and sign some papers but not to worry that if i just sign this paper when i meet with him i wouldnt have to worry about having to meet with him again because i was about to give birth and all….well years later im going thru financial problems and need some money fast to get light bill and rent paid before the lights go out and i get kicked out lol geeze for real tho well my older sister sherry lynn borrows agains hers all the time and stuff so she never signed that paper i did but neither my mom or the insurance guy explained to me or told me that i could borrow against my policy at the time or anything like that just fyi my mom and i have never really ever gotten along well or seen eye to eye on anything she calls me the out spoken black sheep of the family becuz i call a spade a spade and dont pussy foot around the truth so we bump heads quite a bit…..ive told her my financial situation and of course to her its well u got urself in the mess get urself out…my other 3 siblings for some odd reason never have a hard time borrowing money or getting loans from my mom but ive never asked her for anything cuz i didnt want to get my feelings hurt….so finally im desperate have nowhere else to turn and break down crying on the phone practically begging her for help and she has no sympothy empothy nothing she actually changed the subject to about something she was going through at the time so i just put my head down and sucked it up but while i was on phone with her and begging i asked her to let me borrow off my policy and there was never a second she even thought about letting me borrow from it,,,IT WAS A NO B4 I EVEN FINISHED THE SENTENCE OR QUESTION TO HER….ughhhhh so my question to u is she had to send me a copy of the last 2 years of payment on my life insurance policy becuz im trying to get my id and my birth cert. and ss card was stolen outta my ex’s safe and my id has been expired since 2014 from alabama well texas wants my id to continue recieving unemployment which they have paused till i get well she wasnt going to send my info on my policy thank god my daughter who still lives next to her in alabama was around and basically made her do it by using guilt or she wouldnt have even thought about it cuz i ordered a b.c. but still need another form of id to go with it and that was something i knew my mom had and i needed the info so now back to my question i dont want to upset her because we may not get along well much of the time shes been dang good to my kids and grandkids who she keep at age 69 all the time for my only daughter who has 4 kids so she can still go out and hang with friends ext…but im tired of her not being fare to me if u will and treating me a little bit like my siblings she gives and gives to them but i have to be either dying practically or have a very powerful daughter who knows how to use guilt against my mom to get her to do what she wants her to near by before she my mom will even consider at all doing anything that will help me out…so its through prudential in alabama what if anything can i do i have the policy number all those things for the policy now and when my mom sent it she attached a note saying there better not be a breach on it and i dont even know what the heck she is saying or trying to imply there so any info u can give me will surely help me please and ty in advance….
Holly, please call Prudential directly at (800) 778-2255.
My father passed away a couple of months ago and I have since found in all his paperwork that he had a life insurance policy on me when I was little that I did not know about. Since he has passed away do I get anything from that policy?
Nicole, I’m sorry to hear about the recent loss of your father. Are you your father’s estate executor? I recommend calling the insurance company listed on the policy to find out if it’s still inforce (active). It may be paid-up and, therefore, could hold value. If the policy is no longer inforce, then it’s not worth anything to you.
If the policy is inforce: since your father was the owner of that policy, it’s now part of his estate. The probate process will determine who ownership transfers to. Since you’re the insured, it’s likely ownership would transfer to you. You can then choose to keep the coverage or surrender the policy for its cash value, if there is any.
Hi Natasha, I found you article very helpful but I do have a question. We just found out my in-laws have a policy on my husband. They are both deceased. My sister in law is the trustee of their estate and wants to transfer ownership to my husband. However, the parents took a loan against the policy and it was never paid. Do you know what happens to that? If he takes iownership and surrenders the policy, does the company just withhold the loan amount from the payout amount? Thank you.
Hi Tiffany, yes, if your husband becomes the new policyowner and chooses to surrender it, the insurance company will take what is owed from the surrender cash value before paying it out. If he does not surrender it, the interest will continue to accumulate interest unless he opts to pay it off.
Mistake Made in 1st Post It’s 14years since the last time I heard or seen my son not the 4yrs as it stated in previous post
Linda,
First of all, it is my dearest hope that you are able to connect with your son and have him be active in your life in the future. As for the policy you purchased on your son when he was a baby, you are the owner and therefore have all the rights to any cash value that has built up in the plan. If you need the money in the policy, then you can cash it out by contacting the insurance company and ask to surrender the policy (or take a loan against the policy if you need the money and can pay it back at a later time).
I have a policy on my since a baby he is grown now and I have not heard or seen him in 4years don’t know where he Lives or if he still living he move from our home town 14yrs ago at 19yrs old and he 34yrs old now and I still have policy what can I do can I cash it in now or what
What if your parent has a life insurance policy on you and you don’t want them to ? Is there anything you can do ?
Angela, ask your parents if they would be willing to transfer ownership over to you. They aren’t required to, but some parents do this. You can even offer to pay your parents the value of the policy in exchange.
Am I the owner of a 65 year old policy my parents bought on me when I was born?
I just found it.
My mom has just died and my father died 36 years ago.
It has a cash value of $4800 and death benefit of $6800
I have 2 universal life policies on daughter since she was about 10..now 44..I noticed 1 of them changed her to owner instead of me..I still pay premiums ..when asked company they say it transfers after age 18…even though this jus happened about 5 yrs ago…the 2nd policy is still.listing me as owner..they don’t know why it hasn’t changed ownership..they both have about 2000 each cash value build up. Thank you
Some child life insurance policies are designed to automatically transfer ownership to the adult child at a certain age (often age 21). I recommend you call the policy service department of the insurance company that sold you the policies and ask for more details.
Hi my name is Kennette Jonnson. I am an owner of a life insurance through prudential. My mom is the beneficiary (who has passed away). I know she she purchased this policy as I was a child. The policy is active. They just contact me. What happens to that policy?
Hi Kennette – I’m sorry to hear you lost your mother. If you are the owner, nothing happens to the policy just because the beneficiary has passed away. It’s time to add a new beneficiary. Contact Prudential and they can help you update the policy.