First you need to determine how much money you have to work with. If you have a decent sized amount to put toward your child’s future necessities every month; it would probably be best for you to only have a small term policy for your child in the event of an untimely death.
I recommend that two income families have at least a $10,000 term policy for each child and one income families have at least $15,000. These types of policies are typically very inexpensive and can often be added as riders to your own term policy.
Any extra funds you would have after paying for the small term policy could then be used to invest in various ways i.e. stocks, bonds, mutual funds to grow your money and have your money work for you. Although; this method is considered a higher risk; it also can provide a higher return and is often superior to just an endowment policy.
Endowment Policy:
There is an option called an endowment policy and this may be beneficial to you however; keep in mind that you are going to be paying a set amount to help you reach your goal at maturity. Endowment life insurance generally guarantees that a specific amount of money will be available to you or your beneficiaries when the policy ends at its set maturity date or in case of an untimely death. Endowment insurance usually provides a guaranteed death benefit and a component called the cash value.
Typically, if you buy an endowment policy and keep it until maturity, it will provide a lump-sum cash payout equal to the insurance amount, or otherwise know as the death benefit. In case of death before maturity, the death benefit would be paid to your beneficiary.
Endowment insurance can be useful for people who know that they need a specific amount of money in the future; for example: a wedding or college tuition. Endowment insurance allows them the certainty that the money they need will be there.
Weigh out the pros and cons of each before making a decision. Remember that if you decide to go with an endowment policy that you are working toward a specific amount of money. If you go with a small term policy and invest your other funds in stocks, bonds, and/or mutual funds, over a long period of time, you are likely to receive a higher return than with an endowment policy.