Why Buy Life Insurance for Kids in Canada?

Most people think of life insurance as something that grown-ups need, but there are actually several good reasons for parents to buy life insurance for their kids.

When you purchase children's life insurance, you are essentially creating a financial safety net for them. If something were to happen to your child, the life insurance policy would pay out a death benefit to your chosen beneficiary. The beneficiary can use this money to cover costs for the funeral, pay off any debts your child may have, or simply to help with everyday living expenses.

Life insurance for children focuses on securing their future from an early age and offers a cash value component to fund education or other needs. Adult life insurance primarily provides financial protection for loved ones.

How do I buy life insurance for my son or daughter?

This is one question we get asked a lot.

Well, as mentioned before, there are three ways you can buy life insurance for children. Let’s look at each one in detail.

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What is a Child Term Rider?

If you have an existing life insurance policy with an insurance company, you can add a rider to it to cover your children. A child term rider, also known as ‘children’s term rider’ or child rider, is perhaps the least expensive way of buying life insurance for young children. It pays out a death benefit if one of your children dies while your policy is in force.

A child term rider is an add-on to a life insurance policy that provides a specific amount of life insurance coverage for the policyholder's child or children. It’s a cost-effective way for parents to ensure their kids are covered under their policy without needing to purchase a separate life insurance policy for each child. It’s a practical addition for parents who want peace of mind and the ability to provide financial security in case the unexpected happens.

Typically, these riders offer guaranteed insurability up to a certain age. They may cover your children until they reach the age of 22 to 25.

What is a Stand Alone Term Renewable Coverage?

This is a term life insurance policy you can buy specifically for your child. As it’s a renewable term policy, the coverage expires at the end of a set number of years, but can be renewed without a medical exam. You also have the option to convert the policy into a permanent one before it expires.

Imagine you buy a 20-year stand-alone term renewable policy to ensure your family is financially protected while your kids grow up. At the end of 20 years, if you still want coverage, you can renew the policy without a medical exam, though the premiums will increase because you’re older.

This type of coverage is a practical choice for those seeking flexibility and cost-effective protection for a limited period.

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Insurance Coverage for Life (Whole or Universal)

Whole or universal life insurance policies offer comprehensive coverage, but they are more expensive than term life. Such a policy will cover your child for life. That is, it will pay the death benefit regardless of when the insured dies.

In addition to providing lifelong life insurance coverage, these life insurance policies often include an investment option. However, you may want to consider investing in your TFSA or RRSP before getting a policy. This is because whole life insurance policies generally have a lower rate of return and higher fees in comparison to a traditional investment vehicle.

Unless you are a high net worth individual and have maxed out other investment options, buying whole or universal life insurance for children might not make sense for you.  

Does a Child Need Life Insurance?

Let’s face it. No parent wants to think about their child’s death. However, a little planning can make things a lot easier if the unthinkable happens. Life insurance can’t replace your loss, but it can ensure that you will have financial protection to cover funeral costs and other costs.

Putting feelings aside, infant mortality in Canada is 0.5%. While that isn’t unreasonably high, it’s pretty much the same mortality rate as of people between ages 55 and 60, most of whom will have life insurance. When seen from this perspective, children's life insurance looks to be a reasonably sound idea.

How do I Get a Rider Added to My Insurance Policy?

Instead of buying life insurance separately for your child, you can buy coverage for your kid by adding a rider to your current policy.

You can get the rider when you are buying life insurance policies or you can add it later. Since there’s no underwriting for a rider, your child won’t require a medical exam. However, the insurer may ask a few health-related questions.

A single rider will cover all your current and future children. You don’t even have to inform your provider of each child you have; he or she will be covered automatically.

What’s the Difference Between Children’s Whole Life Insurance and a Term Life Insurance Child Rider?

When it comes to child life insurance, the two most popular options are a children's term rider and whole life insurance. Here’s the rundown of their main features.

This should give you a clear picture of what features are in each policy to help you decide which one works better for your family.

When Can You Get Life Insurance for Children?

You can buy child life insurance at any time, including almost immediately after birth. Most life insurers let you buy coverage once a newborn is 15 days old.

Can a Children’s Life Insurance Policy be an Alternative to RESPs?

The answer is YES.

Canadian parents who want to save for their children’s higher education have a strong savings tool at their disposal — the Registered Education Savings Plan (RESP). Yet, an RESP alone may not be enough to cover your kids’ higher education.

The maximum lifetime amount you can contribute to a child’s RESP is $50,000. Given the rate at which tuition fees are rising, this amount may prove insufficient to cover the cost of a college education. Also, funds from an RESP can only be used for pre-approved educational institutions.

Because of these limitations, many parents in Canada use whole life insurance as an alternative to an RESP or to supplement it.

A whole life insurance policy can also be seen as an investment vehicle. Money in this account grows on a tax-deferred basis. That means a whole life policy can provide you with a pile of tax-free money, which you can use for any purpose, like paying a college fee.

This should give you a clear picture of the price range for different insurance companies and the coverage amount.

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How do I choose the right life insurance for children?

There is no one definitive answer to this question, as the best life insurance policy for kids will vary depending on each family's individual circumstances. However, there are some general guidelines that can be followed when choosing a life insurance policy for kids. Some factors to consider when choosing a life insurance policy for kids include the family's financial situation, the child's age and health, and the family's personal preferences.

It’s important to prioritize your own life insurance first, as it secures financial stability for your family. Once your needs are covered, you can explore options for your child.

Remember to budget wisely and avoid overspending on a child’s policy if it strains your finances. Consult with a trusted insurance advisor to clarify policy terms and benefits, and review the coverage regularly to ensure it continues to meet your family’s needs. With thoughtful planning, children's life insurance policies like term life insurance can provide both peace of mind and a financial head start for their future.

Is life insurance for your child worth the cost?

There are a few things to consider when making the decision to purchase life insurance for kids. The first is whether your child is likely to need life insurance. If your child is healthy and not engaged in any risky activities, they are unlikely to need life insurance. The second thing to consider is the cost of buying life insurance for children. Life insurance for kids is typically much cheaper than life insurance for adults.

Who is eligible for life insurance for children?

There is no one-size-fits-all answer to this question, as eligibility for life insurance for children depends on a number of factors, including the insurer's underwriting guidelines and the child's age, health, and family history. However, in general, most life insurance companies will require that the child be at least 8 weeks old and in good health to qualify for coverage.

Life insurance for children is generally available for kids from infancy to young adulthood, typically up to age 17 or 18, depending on the insurer. Parents, legal guardians, or grandparents can purchase these policies, and they don’t usually require a medical exam for the child. Instead, eligibility is often based on general health questions, making it easy to qualify. Most policies automatically cover all current and future children in the family when purchased as a rider on a parent’s policy. Standalone child life insurance policies are also an option and can be customized for specific needs. This makes life insurance for children accessible to most families looking for financial protection and future savings options.

Conclusion

So, should you get life insurance for children? Well, at the end of the day, it’s your call. But, for sure, it’s an affordable and valuable addition to your own term life policy, through a child rider.

Do you feel that you need a bit more guidance? Feel free to check out our Check My Price button and a representative from Dundas Life will be happy to help you get a quote tailored to fit your family’s needs.

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FAQ

What are the benefits of children's life insurance?

There are many benefits of life insurance for children. Some of the most important benefits include:

1. Life insurance can help provide financial security for your children in the event of your death.

2. If you have life insurance, your children will not have to bear the burden of your funeral costs.

3. Life insurance can help your children maintain their standard of living in the event of your death.

What are the medical requirements for kid's life insurance

There are a few medical requirements that must be met in order for a child to be eligible for life insurance. The child must be at least eight weeks old and must be in good health. There is no medical exam required for purchasing life insurance for kids, and there are no pre-existing medical conditions that would exclude a child from being eligible for coverage.

Who is the most trusted life insurance company for kids?

There are many life insurance companies that offer policies for children, and it can be difficult to determine which one is the most trusted.

Some factors that you may want to consider when choosing a life insurance provider for your child include the company's financial stability, customer satisfaction ratings, and the types of policies they offer. Four of the most trusted life insurance companies for kids are State Farm, MetLife, Allstate, and Prudential.

What are the types of life insurance available for kids?

There are two main types of life insurance available for kids: term life insurance and permanent life insurance. Term life insurance provides coverage for a specific period, usually 10, 20, or 30 years, and pays out a death benefits if the insured passes away during the term. Permanent life insurance, on the other hand, provides coverage for the child's entire life and also has a cash value component that can grow over time. ‍

Is cash value a feature of children's life insurance?

Yes, cash value is a feature of permanent life insurance, including children's life insurance policies. As the child's permanent life insurance policy builds cash value over time, it can be accessed by the policy owner (usually the parent or guardian) through policy loans or withdrawals.

This cash value can be used for various purposes, such as funding the child's education or supplementing their retirement savings later in life.