Insurance companies don't write checks to children. Name your eight-year-old as beneficiary on a $500,000 policy and the carrier will not hand that money to an eight-year-old, and they won't hand it to whoever is raising her either. A minor can't give a valid receipt for the proceeds, so the money waits on a court.
What happens is a guardianship or conservatorship proceeding. Somebody petitions to be appointed to manage the child's money. The court appoints them, often requires a bond, and then supervises the whole thing. The conservator files accountings. Large expenses get approved by a judge. Lawyers and filing fees come out of the money. It takes months, and during those months the family that needed the death benefit for the mortgage doesn't have it.
Then, the day the child reaches the age of majority, 18 in most states and 21 in some, the court's job ends and whatever is left gets handed over outright. A nineteen-year-old with $500,000 and no conditions attached to any of it.
There are three ways to avoid all of that.
Name an adult you trust, outright. Free, and it takes one line on a form. The money legally belongs to that adult, though, so if they get divorced, sued, or make a poor decision, it's exposed, because nothing binds them to spend it on the child. People do this with a sibling and a handshake and it works right up until it doesn't.
Name a custodian under your state's Uniform Transfers to Minors Act. The beneficiary line reads something like "Jane Smith as custodian for Emma Smith under the Oregon Uniform Transfers to Minors Act." No court and no conservator, and the custodian manages the money for the child under a statute that has rules in it. The limit is the same one the court has: the money goes to the child outright at the age the state sets, 21 in Oregon, and some states allow an extension to 25. Check that your carrier's form will accept custodian language, because the online beneficiary screens often have no field for it and you'll need the paper form.
Name a trust. A revocable living trust with provisions for the kids, or a standalone trust built to receive the insurance, gives you the one thing the other two can't: control over when and how. Money at 25, 30, and 35. Money for tuition and a first house and nothing else. A trustee you picked, with a successor named behind them. It costs attorney money to draft, and it's the only version where you set the terms. When the beneficiary should be a trust instead of a person covers when it's the right call.
The contingent line is where this bites most often. Primary beneficiary is the spouse, contingent is "my children equally," and nobody looks twice because the spouse is alive and healthy. Then both parents die in the same accident and the contingent line pays minors. Read your contingent line today, not just the primary one.
The same problem shows up from another direction on a policy covering a child, depending on how owner and beneficiary are set. What a policy on your kid is actually buying goes through how those get arranged.
I'm a licensed insurance broker and not an attorney. Custodian language and trust language are the attorney's half of this, and the beneficiary form is mine. Pull the form, look at the contingent line, and if it names anybody under 18, fix that line before you do anything else this month.