Life Insurance for Infants: Parents’ Guide

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In This Article

Thinking about infant life insurance for your little one in Canada, but aren’t sure if it’s a necessary step? We'll cut through the confusion, talk about what it means for your family, and help you figure out if it's something worth considering or if there are other options.

Key Takeaways

  • Life insurance for infants is available in options like term life and permanent life, or in the form of a rider on a your own life insurance policy
  • In some cases, infant life insurance can help guarantee insurability regardless of the babies future health
  • Families should consider how the policy fits into their broader financial strategies, for example contributing to a registered savings account versus getting a policy for your baby

Pros & Cons of Infant Life Insurance

Pros of Infant Life Insurance

  • Cost-Effective Premiums: Coverage for a set period, usually until the child reaches a certain age, often at an affordable rate.
  • Cash Value: Some infant life insurance policies, such as permanent ones, provide lifelong coverage and accrue cash value over time, albeit with higher premiums.
  • Guaranteed Insurability: Securing life insurance for an infant ensures coverage in the future, regardless of any health conditions they may develop.

Cons of Infant Life Insurance

  • Slow Cash Value Growth: The savings component takes time to build, and administrative fees can reduce the cash value over time.
  • Limited Financial Risk: Infants don’t have dependents or financial obligations, reducing the necessity for life insurance compared to adults.
  • Opportunity Cost: Premiums paid for infant life insurance could potentially be utilized for other financial priorities like retirement savings, debt repayment, or investments with potentially higher returns.

If the reason for buying the policy is financial security for your baby, there are alternative methods to consider. A good example is investing in education savings plans (RESPs) or contributing to savings and investment accounts, both can offer greater flexibility and potential returns.

Exploring Infant Life Insurance Options

Life insurance policies for babies work the same way as adult policies in Canada. They can come in various forms, each with its unique features. 

Types of Policies for Infants

When it comes to infant life insurance, there are three common policy types to consider: 

  1. Term life insurance: offers coverage for a set period, typically until the child reaches a certain age and is a cost-effective choice
  2. Whole life insurance: a type of permanent life insurance policy that offers lifelong coverage, includes a cash value component that grows over time, and has a high premium 
  3. Child rider: an add-on for a life insurance policy that provides coverage until your children are of a certain age. This is often the cheapest way to get coverage for your child.

Should I buy life insurance for my infant in Canada?

As we’ve explored, infant life insurance can be beneficial, but in the majority of cases, a life insurance policy for your infant is not necessary. While infant life insurance is an option, there are many alternatives that might better suit you and your child, including;

  • Getting your own life insurance policy
  • Paying down your debts
  • Set up an RESP (registered education savings plans)

How to Get an Infant Life Insurance Policy

Deciding to buy your baby a life insurance policy is a big step. You can either buy a separate policy for them or add a rider to your own insurance. Applying for an infant's policy is usually straightforward and doesn't involve a medical exam, regardless of the type you choose.

Selecting the Right Insurance Company

Selecting the right life insurance company is important. Some insurance companies offer whole life policies for children, offering lifetime coverage as long as premiums are made.

Others might offer standalone policies for infants or a rider that pays out if the infant passes away before the parent, with the option to convert to a permanent policy later on. Remember to do your research and look out for internal fees, not just the upfront cost, when selecting a life insurance policy for your child.

Application Process & Underwriting

Applying for a child life insurance policy is quite straightforward. The application will likely need the infants:

  • full name
  • date of birth
  • Social Security number

Take note: The application may include a few health-related questions for assessing the child’s health status.

Frequently Asked Questions

How does infant life insurance differ from life insurance for adults?

In Canada, infant life insurance works the same as adult policies do. The difference is adult life insurance policies focus on income replacement and financial protection for dependents, whereas infant life insurance is more for locking in affordable rates for your child’s future. Infant policies often come with lower premiums and can provide lifelong coverage.

Can grandparents or other family members buy life insurance for babies?

Yes, grandparents can get a policy to ensure their grandchildren are financially protected, while other family members may do so as part of estate planning or to build a financial legacy for the child.

How do premiums for infant life insurance policies compare to those for adults?

Premiums for infant life insurance policies are typically lower than those for adults due to the lower risk associated with insuring a child. Infant policies often offer affordable rates, allowing parents to secure coverage for their child at a relatively low cost.

Getting life insurance for a child at a young age can lock in these lower rates for life, but you’ll be paying into those premiums for a much longer period of time.

Should I get life insurance for myself after having a baby?

Securing a life insurance policy for yourself after having a baby is a good way to protect your loved ones’ future. It offers financial protection and peace of mind, ensuring your child and family are looked after if you were to pass away. Life insurance can assist in covering expenses like childcare, education, and daily living costs, serving as a safety net for families.

What happens to the policy if the family moves to another province in Canada?

If the family moves to another province in Canada, the life insurance policy typically stays in effect without any changes to coverage or benefits. Life insurance policies are portable and provide coverage regardless of where the insured individuals reside within Canada.

Don’t forget to notify the insurance company of the change in address to ensure that premium payments are processed correctly.

Can parents name beneficiaries other than themselves for their infant's life insurance policy?

Absolutely, parents can designate beneficiaries other than themselves for their infant's life insurance policy. Typical beneficiaries include other family members like grandparents, siblings, or a trust set up for the child's benefit.

It's important to review and update beneficiary designations regularly, especially after significant life events such as births, deaths, or changes in family circumstances.

Can the coverage from infant life insurance policies be used for education or other expenses?

By getting a life insurance policy for your child at a young age, you could potentially build cash value over time that can be used to pay for a child’s education. Alternatively, you can invest in a Registered Education Savings Plan (RESP), instead of a life insurance policy. An RESP prioritizes your child's education, providing a dedicated fund for their future academic pursuits.