There are three primary reasons that insurance companies offer insurance for your children. First, the odds of your child dying are very small. Second, because the odds are so small, the insurance offered is very inexpensive, serving as a great temptation to buy it. Third, the insurance company makes money by investing your premiums. In fact, they can return all of your premiums when your child becomes an adult, and still make more than what they returned to you.

As an example, consider that you insured your new son for $5,000 and kept paying the monthly premium of $3.41 (or more) until he was 21 years old. Let's also assume that they even refunded your premiums to your son on his 21st birthday. During this time, you paid a total of $818.40, and they were nice enough to give it back to you. Of course, they invested your money every month, so that when they gave you back your money, they stilll had $1,369 (at a 9% rate of return). If you had invested the money yourself, you would now have a total of $2,187 instead of $818.

Now imagine that you had signed up for that $25,000 policy at only $17 a month for the 20-year period. They returned your premium payments of $4,080, and kept $6,813 of your money for themselves. Wonder why they offer this insurance? Do you think you could invest it yourself and have the entire $10,893?