Life Insurance for Families
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Key takeaways:
Life insurance for children in Canada works the same as it does for adults. You put a life insurance policy in place and, if that person passes away, the beneficiaries get a death benefit in a lump sum.
The difference is that life insurance for children is that the policyholder is a minor, not their parents.
There are three commonly available options for life insurance for children:
Parents will usually get life insurance for their children to:
While life insurance is generally a good idea for many Canadians, policies for your kids likely aren’t the best way to build financial security for your family or dependents.
The first step to securing your child’s financial future is getting your own life insurance policy.
* Every PolicyMe policy comes with $10,000 of free life insurance for each of your kids.
Because term and whole life insurance for kids functions the same way as those for parents, there are virtually the same benefits and drawbacks as adult policies.
Here are some general pros and cons of life insurance for children in Canada.
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In most cases, a life insurance policy for your child is not necessary. There are many other ways that you can provide financial stability to your family, including:
If, however, you want to get life insurance for children, there are times when it might make sense:
If all of your other financial priorities are taken care of for your family, then life insurance for your kids might be a worthwhile investment.
If you haven’t secured all of the financial safety nets listed above, then it’s probably a better idea to focus your investment there, instead of in a children’s life insurance policy.
Not sure how much life insurance you need? We’ve got you covered:
The second scenario where life insurance for children might make sense? If your child or your family has a history of a medical condition that could affect their ability to get life insurance as an adult.
In these cases, getting your child a whole life policy could guarantee coverage when they reach adulthood.
Still keen to purchase life insurance for your child? Consider adding a child rider to your own life insurance policy. These are add-ons that you can attach to your existing policy for a fee on top of your premiums.
Once your kids become adults, coverage with the rider ends and they have the option to convert it into an individual plan. This is usually cheaper than buying a life insurance policy outright.
They can also get guaranteed life insurance Canada to get the coverage they need if your family has a past with illness.
You can buy life insurance for your child in Canada at any time. Many life insurance policies allow you to begin a policy as young as 15 days old up until age 17.
Many whole life insurance policies for kids have an investment component. So purchasing the whole life early will maximize the cash value later in life. This, of course, comes with the trade off of high premiums for whole life insurance policies.
The youngest age to get life insurance in Canada is shortly after the child is born—typically after just 15 to 60 days, but it depends on the health of the child and the type of policy.
Most insurers will allow you to purchase a child life insurance policy at any time until your dependent is the age of 18.
Child life insurance—like the adult version—comes in a variety of types. The three most common types of children’s life insurance policies include:
Here’s what you need to know about each of them.
Whole life insurance for children is the most expensive and comprehensive coverage on the market.
This type of dependent life insurance pays out upon the death of the policyholder, regardless of their age. As the name suggests, it provides coverage for the policyholder’s whole life.
Whole life coverage is suitable for high-income families who have maxed out their contributions to TFSAs and RRSPs and are looking for another investment vehicle.
Because whole life insurance locks in the premium payment at the time of policy signing it’s also suitable for children or families with existing medical conditions that may prevent them from getting coverage later in life.
Term life insurance for children provides coverage for a pre-defined period of time—typically 10, 20 or 30 years. These policies can be purchased and renewed as needed until the dependent turns 18. Then they’re able to purchase their own adult term policy.
Premiums for term policies are much cheaper than whole life insurance. And their payouts are more significant than child riders. So it can be a happy medium for parents.
But remember that the primary beneficiary of these policies are not your children, but you as the policyholder.
Child riders are the ideal solution for parents that already have life insurance or who want to get coverage after the birth of a child.
Child riders are tacked onto your monthly life insurance premiums and provide coverage until your children are of a certain age. This is usually the cheapest way to get coverage for your child.
And covers most immediate expenses if something unthinkable were to happen. The policy pays out a set amount of money; usually between $5,000 and $30,000.
Here’s how $10,000 in child coverage compares with other top life insurance companies:
The amount of life insurance coverage a child can get depends on the type of policy you choose, and the amount of coverage you purchase.
No parent wants to entertain the thought of something happening to their child. But it's important to decide on the amount of coverage your family might need in that situation.
This will help to ensure that you buy the right coverage at the right price.
The first course of action is rarely getting life insurance on your kids when preparing for their financial future. But in some scenarios, life insurance on a child has its merits.
That said, there are many alternatives to children’s life insurance that are better financial moves for you and your dependents.
Opening a high-interest savings account on behalf of your child is one way to secure their financial future.
Not only will it yield greater returns, but it's also easy to set up and access. You can contribute as much as you want, as often as you want to this account.
You can also deposit monetary gifts they get from family and friends. When your child is older, they can use the account to buy their own life insurance policy—with some extra to spare.
For parents in Canada, the Registered Education Savings Plan (RESP) lets you save and invest money for your child's post-secondary education.
In an RESP, investments grow tax-free. Your child will only be taxed for the income they receive from the RESP once they're in university, and since the income bracket of students is low, so is the tax on RESP payments.
The federal government also adds 20% of your contribution to your child's RESP with the Canadian Education Savings Grant (CESG). You can get up to $7,200 in total CESG.
And there's the Canada Learning Bond (CLB), which the government contributes to the RESP of children from low-income families.
The best part about an RESP is that even small contributions make a big difference over time.
Benefits are available at the provincial level depending on where you're located within Canada, for example:
Securing your life insurance policy is one of the best ways to protect your children's financial future.
As a parent, you want to know your children are taken care of in case something happens to you. This is why it's more important for you and your partner to have life insurance policies. Having coverage for yourself is one of the best ways to protect your children's financial future.
Not only will this cover medical bills and funeral expenses in case of your death, but it also ensures your children's daycare services, education, and other expenses are paid after you're gone.
With your own life insurance policy, you can add on term riders that cover all of your children until they're adults. This is easier to get and much cheaper than a life insurance policy for a child.
Build up emergency and rainy day funds for unexpected expenses, like last-minute replacements for school-related technology.
These funds give you greater control and yield greater returns when stored in a high-interest savings account.
Should money get tight in the future, you won’t get charged for cash withdrawals that reduce your benefits (like with life insurance for kids).
Yes, you can buy a life insurance policy for your adult child. But you will need to take a few steps to enroll in a life insurance policy for your adult child; this includes:
As a parent, your responsibility to your children doesn't always stop when they grow up. It can continue well into adulthood as they learn to navigate the world of being a grown-up. This can include ensuring they have a life insurance policy.
Use insurance calculator Canada to get the best rates for children.
The majority of life insurance companies will not require a child to do a medical exam when you apply for a policy. You simply complete the application and answer a few questions about their existing and family medical history.
This can be helpful in the future too, as when they become adults and choose to transfer a children's life insurance policy to an adult policy, they may be able to get approval without a medical exam.
But there may be exceptions to this depending on the life insurance company policy.
In general, no, a children's life insurance policy is not worth the cost. You can do many other more important things for your family with the planned monthly premium payments, such as start an emergency fund, save for retirement, save for college, and more. Family life insurance is important, but it's most important to get the parents covered first.
There are exceptions, though. For example, a children's life insurance plan may be worth it if your family has health issues that are likely to pass to your child. Not only do you have coverage if your child passes away due to this condition, but it also guarantees their coverage as an adult by converting the policy.
You may also benefit from getting critical illness Canada or combined life insurance.
Get insurance quote online in the comfort of your own home through PolicyMe.
Our sources:
Canada, E. a. S. D. (2022, June 14). Registered Education Savings Plans. Canada.ca. https://www.canada.ca/en/services/benefits/education/education-savings/resp.html
Canada Revenue Agency. (2022, November 10). Canada Education Savings Grant (CESG). Canada.ca. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps/canada-education-savings-programs-cesp/canada-education-savings-grant-cesg.html
Government of Canada, Statistics Canada. (2022, January 24). Mortality rates, by age group. https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1310071001
Ministry of Education and Child Care. (2022, November 30). British Columbia Training & Education Savings Grant Information - Province of British Columbia. https://www2.gov.bc.ca/gov/content/education-training/k-12/support/scholarships/bc-training-and-education-savings-grant
OSAP: Ontario Student Assistance Program. (n.d.). ontario.ca. https://www.ontario.ca/page/osap-ontario-student-assistance-program
WinQuote®. (n.d.). https://www.winquote.net/
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