A $10,000 life insurance policy on a child only makes sense for a family that:
- Would very much want to have a modestly expensive funeral / burial / wake for the child, and would suffer permanent emotional trauma if they could not.
- Has so little in savings that a $ 10,000 hit to their funds would be crippling financially.
Thus, it could make sense:
- If the family is poor enough that it is not realistic to save a $10,000 emergency fund
- Or during the time it takes the family to save a $10,000 emergency fund.
Many families are in this financial situation. A family in the combination of this financial situation and this emotional situation might be well served to seek religious counsel. If they find ways to remember loved ones without expensive funerals, they could save money on insurance.
Ironically, a much larger life insurance policy for a child might make more sense. Look at it this way: What is the replacement cost of a child?
A family that has only one son (and any number of daughters), or a family that has only one daughter (and any number of sons), stands to lose an obvious part of their genetic and cultural legacy if they lose that son or daughter.
It is expensive to conceive, bear, and raise a child to a particular age. This cost increases as the child ages. The number of years of child-raising cost obviously increases. Also, the cost of conceiving another child can go from very small to very large (especially if fertility treatment or sterilization-reversal surgery is required).
Unfortunately, most life insurance companies do not think of things this way. I am not aware of any 100,000 - 250,000 dollar children's life insurance policies on the market.