When you purchase life insurance, you ensure your loved ones have a financial safety net. One of the greatest benefits of life insurance is having peace of mind that your dependents will be provided for in the event of your passing. If you’re adopted, or thinking about growing your family through adoption, you may have questions about how the adoption process impacts the way you shop for life insurance. Let us walk you through common questions about life insurance and adoption.
Do I need life insurance to adopt a child?
Life insurance requirements for adoption will vary by state and agency. However, you should still consider shopping for life insurance as a prospective adoptive parent. You’ll want to make sure your adopted child is protected if anything were to happen for you. Also, by shopping sooner rather than later, you can lock in a more affordable rate on your premiums. If you have an existing life insurance policy, make sure you update it as soon as possible after you officially adopt your child to ensure you have enough coverage.
How Being Adopted Impacts Your Life Insurance
Being adopted doesn’t impact your life insurance application, with one exception: family history. Life insurance companies have a detailed process for assessing risk that involves several factors, including age, income, hobbies and behaviors, employment, and—of course—the results of your medical exam. As an adopted person, you likely have answers for the majority of these questions, but it’s good to be prepared in the case you don’t.
Why Family History May Impact Life Insurance Rates
Insurance companies use your biological family history to help determine your risk of illness or disease down the road. In the case of adopted children, that family history may or may not be readily available.
There are two possible scenarios that could happen as a result:
If you have no information about your biological family history, it will be marked unknown on your application and won’t be counted against you. Additionally, your application will note that you’re adopted.
If you are aware of your biological family’s medical history, it’s important to be as specific as possible. Give the underwriter as much detail as you can, disclosing history of disease, illness or other genetic markers.
Whether you know your family history or not, be sure to answer the life insurance application questions to the best of your knowledge as honestly as possible. Intentionally leaving information out is considered life insurance fraud. Failure to answer the questions truthfully could lead to the cancellation of your policy, which means the death benefit won’t be paid out to your beneficiaries.
Should I buy life insurance for my child?
Insurance companies follow strict rules when it comes to issuing life insurance for children. In most states, the only parties eligible to insure children under the age of 17 are birth or adoptive parents and court-appointed legal guardians.
In addition, children that are 15 years old or older must sign any life insurance application that someone takes out on them. Other parties—such as grandparents—may want to buy insurance policies for children. They’ll have to get written consent from the child’s parent or legal guardian.
In addition to limits on who can buy life insurance policies on children, insurance companies typically have limits on the dollar amount a policy can cover. Companies can refuse your request to buy life insurance on someone else, including children, if you’re attempting to insure them for more than the maximum death benefit.
Something else to consider with life insurance is family history. Insurance companies look at your health history and other genetic health traits during the underwriting process. These factors could influence an insurer’s decision to approve or deny a life insurance policy for your biological child.
Buying Life Insurance for Your Adopted Child
Your adopted child is just as eligible for life insurance as a biological child would be. Insurance companies can’t discriminate against children whether adopted or biological, and they’re afforded the same rights for as long as you have legal guardianship.
Life insurance companies focus on insurable interest when they determine if someone should be a beneficiary for your insurance policy. This insurable interest essentially states that the person or parties involved will suffer financially if you die.
While this might cause you to consider naming your child as your life insurance beneficiary, this is not actually a good idea. It is typically in a minor’s best interest to appoint another adult—potentially a loved one who will be looking out for the child in the event of your passing—as a beneficiary, at least until your child is of legal age.
Naming Your Child as Your Life Insurance Beneficiary
You should generally name an adult as the primary beneficiary of your life insurance policy. Life insurance companies can only pay out the death benefit to legal adults. In order to ensure this benefit goes where intended, you should name a guardian as the beneficiary or establish a trust. Combine this with a will and other final directives, and you can be reasonably certain that the death benefit will go where you’ve designated.
Buying Life Insurance if You’re in the Process of Adopting a Child
If you’re currently seeking life insurance to help provide for your foster or future adopted children, you should name someone you trust as the beneficiary. This can help you protect these children and provide for them in the event of your death. After the adoption is finalized, be sure to update the terms of your will and other final directives to include your adopted child.
Adoption is a substantial life change and a big event, which means you may want to reexamine your current life insurance policy and needs once it is finalized. Update your life insurance if necessary and make the appropriate adjustments to ensure your loved ones are provided for.
SelectQuote can help protect your family with the right life insurance coverage.
If you have questions about purchasing life insurance as either an adoptive or biological parent, we can help. At SelectQuote, our experienced licensed insurance agents will take the time to learn about your unique needs and situation. We search highly trusted carriers in just minutes, quickly and easily finding the right coverage options for your family.
