The fact that not all children of believers are saved does not alter the truth that all of them are in the covenant of grace. Scripture speaks of the unbelieving children of believers as covenant-breakers (e.g., Jeremiah 31:32). They could hardly break the covenant if they were not in any sense in the covenant. Theologians correctly depict the covenant of grace by two concentric circles. The smaller one represents the covenant as vital relationship, and only the regenerate are within it. The larger one represents the covenant as a legal relationship, and all children of believers are in it. The covenant in the latter sense can be broken, and not infrequently is.

I just saw this quotation by R. B. Kuiper. Personally, I’d rather label the two circles “elect and non-elect” or “regenerate and unregenerate,” rather than “vital and legal.” Of course, I do think there is a qualitative difference in the vitality of the two groups, but we can’t read people’s hearts so there is virtually nothing we can do with that practically. At least not in a moment.

The differnece becomes manifest over time.