Why grandparents are buying life insurance for their grandkids

When grandparents think about supporting their grandchildren, the ideas are often familiar: helping with education, birthday gifts, or lending a hand with a first car or home one day.

But more and more grandparents are choosing a different – and less obvious – option: life insurance.

At first glance, that might sound unusual. After all, kids don’t have dependents. They don’t need income protection. So why does this strategy keep coming up in conversations with families?

The answer is simple: it’s not about insurance for today. It’s about building something meaningful for the long term.

A gift that lasts a lifetime

Permanent life insurance for children is designed to stay in place for life, not just a few years.

When a grandparent purchases a policy for a grandchild, they’re often thinking about things like:

• Creating a financial foundation early
• Locking in insurability while the child is young and healthy
• Giving a gift that grows quietly over time
• Supporting future milestones in a flexible way
   

Unlike toys or even cash gifts, this is something that doesn’t get outgrown.

For many grandparents, that’s the appeal. It’s a gift that works in the background, without needing constant attention or decisions along the way.

Why grandparents are uniquely positioned to do this

Grandparents often come to this idea from a different stage of life. Their own financial picture may be more settled, and their focus may be shifting toward legacy and how they support their family not just today, but years from now.

This type of planning allows them to help in a meaningful way without putting pressure on parents or setting expectations for how the money must be used. There’s no timeline attached, no immediate decision required by the child, and no risk of the gift being “spent too soon.”

It’s simply support, given early, with room to grow.

How permanent life insurance for children works

Permanent life insurance (often whole life) provides lifelong coverage and includes a cash value component that grows over time.

Because the policy is started early, premiums are typically lower and the policy has decades to build value. Over time, that cash value can be accessed by the policy owner, depending on how it’s structured.

Later in life, it can help support things like:

• Education costs
• Starting a business
• A down payment on a home
• Long-term financial flexibility
   

There’s no requirement that the money be used for one specific purpose. The value is in the options it creates.

Locking in insurability early

One of the most important – and often overlooked – benefits of life insurance for children is insurability.

Health can change unexpectedly over a lifetime. What’s easy to qualify for today may not be possible later. By securing a policy early, grandparents can help ensure their grandchild has coverage in place regardless of what happens to their health in the future.

For families with a history of medical issues, this can be especially meaningful. It removes uncertainty and provides long-term stability that can’t always be added later.

Ownership, control, and flexibility

These policies need to be set up with care. Often, the grandparent funds the policy while a parent owns it, or the policy is held in trust. Ownership can later be transferred to the child when the time is right.

This structure helps ensure the policy is managed responsibly early on, while still allowing it to become part of the child’s own financial picture down the road.

The details matter here. Ownership affects control, access, and how the policy fits into the family’s broader planning, which is why thoughtful setup is so important.

A different kind of legacy

For some grandparents, this approach is part of a broader legacy plan. It may sit alongside education savings, charitable giving, or other long-term strategies.

What makes life insurance unique is its certainty. It creates a defined benefit that isn’t tied to market performance or timing. And because it can pass directly to the next generation, it can be an efficient and intentional way to transfer value.

Just as importantly, it reflects care and foresight. It’s a quiet way of saying, “I was thinking about your future long before you had to.”

Is this right for every family?

Not always.

Life insurance for grandchildren tends to make sense when other priorities are already covered and the goal is long-term support, not short-term access. It works best when everyone involved understands why it’s being done and how it fits into the bigger picture.

Sometimes it’s the right tool. Sometimes it isn’t. Both outcomes are perfectly fine.

Starting with a conversation

We see gifting life insurance as a family conversation – not a transaction.

That’s why we take the time to understand what you want this gift to represent, how it fits into your plans, and how to structure it so it supports (rather than complicates) your family’s future.

Because when it comes to legacy, the most meaningful decisions are the ones made thoughtfully, with clarity and intention.

If you’re considering life insurance for a child in your life, reach out. We’re happy to share more information in a no-obligation conversation.