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Life Insurance for Kids: A Guide for Parents

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Key Takeaways
  • Life insurance for kids typically isn't necessary for most Canadian families.
  • A child insurance policy only makes sense in specific situations, such as when there is a concerning family health history or a child earns income.
  • Most parents should prioritize their own life insurance, as it provides a safety net for kids if something happens to a caregiver.
  • Parents should focus on building financial security for children through savings and investments before considering life insurance for kids.

What is life insurance for kids?

Life insurance coverage for children in Canada is a type of life insurance that covers a child. The child is the policyholder and typically, the parents are the beneficiaries. The death benefit is paid out if the child passes away and can help parents cover the child’s final expenses, such as funeral costs. 

There are two types of life insurance for children in Canada:

Buying life insurance for a young person is one way to lock in a low rate on a whole life policy for a child. But generally speaking, it’s not necessary for the average Canadian child.
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Most kids don’t need life insurance

New parents often consider purchasing life insurance for a child, but there are better ways to protect their financial future. For most Canadians, this means getting an adult term life insurance policy that secures your kids’ financial future if you pass away—something that’s especially important if you’re a single parent. Every PolicyMe policy comes with $10,000 of free life insurance for each of your kids.

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Do you really need life insurance for your kids?

For most Canadians, life insurance for kids is not worth it. The infant mortality rate in Canada is 0.46%, according to StatsCan, which means most children will not die young and coverage for them comes at a high cost.

If your goal is to create a financial safety net for your kids, consider whether you could better allocate the cost of a monthly life insurance premium for kids into something else. For example, paying down existing debt and contributing to a savings or investment account for your child (or for your retirement).

“Protecting your child financially starts with getting coverage for yourself as a parent. You have to put on your own oxygen mask first before you put on someone else’s.” —Stephanie Roux, Life Insurance Advisor

That said, there are a few situations where a child life insurance policy might be appropriate:
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  • Your family history includes serious health conditions and you want to avoid medical underwriting
  • The child earns substantial income (e.g., actor, model, social media) at a young age
  • You’ve already saved a lot of money for emergencies and retirement

Pros and cons of life insurance for kids

The biggest benefit of life insurance for kids is locking in affordable coverage in a family with inherited health conditions. The biggest downside, though, is that you tie up money in premiums that could be better used to protect the people who rely on your income.
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  • Savings component: A whole life policy includes a cash value component that grows over time. You could potentially draw on it later to help with tuition fees, down payments, etc. for your child.
  • Affordability: Kids’ life insurance comes with lower premiums than life insurance for adults, and buying while they’re young locks you into a low rate for life.
  • Guaranteed future coverage: Your child is guaranteed coverage in the future, even if a family health condition pops up. This means no medical exam and peace of mind, typically up to a certain age and coverage amount.
  • Coverage for final expenses: You will receive a lump-sum payout if your child passes away, which helps cover funeral expenses, counseling, and income replacement while you’re off work.
  • Slow growth: It takes years to accumulate cash value, and early premiums typically cover admin costs and insurance fees. Borrowing against the cash value can reduce the death benefit and may have tax implications.
  • Limited payouts: The death benefit on a child’s insurance policy is typically small—just enough to cover funeral costs or offer guaranteed insurability. As an adult, they’ll likely need to purchase more coverage to be adequately protected.
  • Single-purpose savings: Because the policy is based on your child’s life, it only pays out if they pass away. For goals like saving for education or future expenses, options such as RESPs or TFSAs offer more flexibility and growth potential.
  • No payout if you die: A child’s life insurance policy provides no financial protection for parents. If your goal is to ensure your child’s financial future if you pass away, consider getting a term life insurance policy for yourself and contributing to savings accounts for your child’s future expenses.

The bottom line: Life insurance is designed for people with financial dependents, so adult policies are a better choice for most kids and parents to achieve financial stability.

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Types of life insurance for kids

There are two main types of child life insurance in Canada:

  • Whole life insurance for the child
  • Child rider added onto an adult policy

A whole life insurance policy (a type of permanent life insurance) for a child is more expensive and more comprehensive. The child will have their own life insurance policy for their entire life, but premiums are also lifelong. You lock in a rate when you secure the policy.

A child rider added onto an adult policy is a low-cost way to cover a child until they reach a certain age. The monthly premiums with term riders are modest, but so is the payout. It covers the child for a certain number of years and then expires, or the grown child can convert it to a full policy of their own.

 
Whole life insurance for children
Child rider
Type
Permanent, standalone policy for the child
Add-on to an adult’s life insurance policy
Duration
Lifelong, so long as premiums are paid
Until a set age (usually 21–25)
Payout
Pays a death benefit if the insured child passes away
Smaller benefit (usually $5,000 to $30,000) if the child dies while the rider is active
Cost
High
Low
Cash value
Yes, can be borrowed against or withdrawn later
No
Best for
Higher-income families who have maximized other savings vehicles (like RESPs, TFSAs, RRSPs) and want to lock in lifelong coverage or guaranteed insurability for a child who may develop health issues later
Parents who want affordable protection for funeral or medical costs for a child
“Think about whether you’re doing this to protect yourself or your kid… And that will inform the type of coverage and amount of coverage you get.” —Stephanie Roux, Life Insurance Advisor

How much does life insurance for kids cost?

Whole life insurance policies typically cost between $30 and $80 per month, depending on the child’s age, the life insurance company, and the coverage amount.

Child riders added to a parent’s policy are cheaper—around $2 to $10 per month per child on top of the adult’s premium. The cost of life insurance for an individual adult in Canada averages between $20 and $30 per month, depending on age, coverage amount, and term length.
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Alternatives to kids’ life insurance

Saving, investing, and adult life insurance are good alternatives to kids’ life insurance. The right option depends on your goal for your family.

1. Save money for your child by saving and investing

A high-yield savings account or investment account are great ways to set aside money for your child’s future. Unlike child’s life insurance policies, these accounts are easy to set up, simple to access, and typically earn higher returns.

You can contribute as much as you like, include monetary gifts from friends and family, and explore investment options to grow the money even faster. The savings can serve as a rainy day fund, emergency fund, or support your child’s future expenses when they need it most.

2. Tap into government grants to help fund a child’s education 

Open a registered education savings plan (RESP) for your child. It’s a tax-free way to save money for educational purposes, and the federal government offers incentives:

Provincial governments may offer additional support. For example:

RESP funds are intended for educational purposes. Withdrawals are taxed once the child is in school, usually at a very low rate since students tend to have little or no income.

3. Get your own policy to protect the child while they’re dependent

A child is more likely to need financial help if you pass away than the reverse, which is why family life insurance is so effective.

If anything happens to you or your partner, your life insurance policy—or your couples policy—will pay out to protect your family’s financial security. The remaining adult or a trusted loved one could use the payout to cover:

  • Your funeral costs
  • Daycare
  • Education costs
  • Daily living expenses for children

If you really want your child to have their own protection, you could add a child rider to an adult’s policy. Every PolicyMe policy automatically comes with $10,000 in free child coverage at no extra cost.

“The priority is to have the parent(s) insured, making sure their income is secured. And then an extra layer of protection would be a child rider, and then an extracurricular gift would be a whole life policy if the budget allows.” —Stephanie Roux, Life Insurance Advisor

FAQ: life insurance for kids

Bonnie Stinson is an insurance writer and researcher in Toronto with a decade of experience producing helpful, accurate content for Canadians. They have published resources for some of Canada's most innovative and consumer-trusted companies in the health, legal, and fintech sectors. 

Bonnie Stinson is an insurance writer and researcher in Toronto with a decade of experience producing helpful, accurate content for Canadians. They have published resources for some of Canada's most innovative and consumer-trusted companies in the health, legal, and fintech sectors.Â