Life Insurance for Kids: What Parents Need to Know
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Quick answer: do children need life insurance?
The majority of Canadian children don’t need their own life insurance policies, though there are exceptions. Every family’s financial situation will differ, so the answer for you will depend on your particular goals.
In some cases, a family may benefit from child life insurance (if there is family medical history, if the child will be a lifelong dependent, if the child earns their own income, or if it’s a high-net-worth family with estate planning concerns).
Most parents are better off prioritizing their own coverage and putting money into savings. Child life insurance policies (and child riders) provide a small payout to the parents if the child dies, and this is intended only to cover funeral expenses.
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 products for children in Canada:
- Standalone policy: An individual life insurance policy bought for the child
- Child rider: Kids’ coverage added to an existing adult’s life insurance policy
Buying life insurance for a young person is one way to lock in a low rate on a whole life policy for a child before they grow up. But generally speaking, it’s not necessary for the average Canadian child.
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.
Do children really need life insurance?
In most Canadian families, the answer is no, children don’t need life insurance. Here are three ways to make this decision:
1. Would a child’s death have a big impact on your family’s financial stability?
- In most cases: A child’s death would be devastating, but with small temporary costs.
- Rarely: A child’s death would seriously affect the family’s income.
2. Is child death likely to occur?
- In most cases: Child death is unlikely. The infant mortality rate in Canada is 0.46%, according to StatsCan.
- Rarely: A child may anticipate life-threatening family medical issues.
3. How else could that money benefit my kids?
- In most cases: The cost of coverage is better allocated to an adult policy or saving for the child’s education.
- Rarely: The cost of coverage is worth it for the tax benefits or lifelong coverage.
“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
When does it make sense for a kid to have life insurance?
There are rare exceptions where a child life insurance policy could be appropriate:
- Family medical history: The child is at high risk for developing a serious medical condition in the future so you wish to lock in coverage in case the child becomes uninsurable or heavily rated as an adult due to underwriting and exclusions.
- Wealth transfer: You are a high-net-worth family and you’ve already saved plenty for retirement and emergencies. Permanent coverage could be part of a thoughtful wealth transfer strategy or to equalize inheritances.
- Child is earning income: The child is earning a substantial income at a young age, (perhaps through acting, modeling, or social media) and the household is relying on it.
Speak with a financial advisor if you’re not sure whether your family could benefit from a child life insurance policy, whether universal life insurance or a permanent life insurance policy. If you’re not sure, skip it and opt for term coverage for the grownups.
Parents vs. children: who should be insured first?
The person who should be insured first is the one whose death would cause the most financial harm to the family. In most cases, the answer is the parents.
Life insurance is about ensuring income and stability for dependents, not necessarily about insuring the most vulnerable person. But because each family’s financial needs are different, here are five questions to help you identify whether you, your child, or both of you need coverage:
1. Who would create more financial difficulties if they died, the parents or the child?
If the parents contribute more to the household income, then the adults should be insured first.
2. Who has financial dependents, the parents or the child?
Parents typically support children financially, so the adults (and their incomes) should be covered first. If the child earns an income to support the family, then a child policy may make sense.
3. Could savings cover a worst-case scenario?
Your savings might be able to cover funeral expenses for a child’s death or a parent’s death. But you’ll need more than savings to cover an adult’s household contributions and pay ongoing bills.
4. Are both parents or guardians fully insured already?
Everyone a child relies on should have adequate life insurance, including the primary income earner and the stay-at-home parent.
5. Is there a specific reason to insure the child, if the adults are already insured?
You might get a child or young adult their own policy for health or wealth transfer reasons. Life insurance can guarantee a child’s insurability against future medical conditions, and it can be part of a larger estate plan for your family’s financial future.
Pros & 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.
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.
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.
“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
Child riders vs. a standalone life insurance policy
A child rider is a low-cost add-on to an adult’s life insurance policy, and it provides limited coverage for children. A standalone child life insurance policy provides separate coverage, with higher limits and sometimes cash value growth.
Child riders: Affordable, straightforward, enough for most families.
Standalone policies: More costly, guaranteed insurability, lifelong coverage option.
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.
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.
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:
- Canada Learning Bond: Provides up to $2,000 for eligible families
- Canadian Education Savings Grant: Matches RESP contributions up to $7,200
Provincial governments may offer additional support. For example:
- British Columbia: B.C. Training and Education Savings Grant (BCTESG) is deposited into the B.C. child's RESP account
- Ontario: Ontario Student Assistance Program (OSAP) provides financial aid for college or university
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.
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
You could also consider critical illness insurance and disability insurance for other types of household income protection for your family while you’re still alive.
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
How much does life insurance for kids cost?
Whole life insurance policies can 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 term 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, but this will depend heavily on age, coverage amount, and term length.
Adults who have a term life insurance policy with PolicyMe get $10,000 in free child coverage per child.
What else could my money do?
For the cost of a child’s life insurance policy, you could choose another way to secure your family’s financial future. It’s only $10–$30 per month, but that’s nearly $6,500 over 18 years.
How else could $10–$30 every month go toward building your family’s future? Consider this order of investments for your money, if you want to ensure a child’s future:
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.