Life Insurance For Children
Should I Buy Insurance for My Child?
Our kids and grandkids have just about everything they need. Insurance for children gives them a head start for tomorrow and makes sense for many families that are able to do so.
This page has insurance information about critical illness and life insurance options for families considering options for their children and grandchildren in Canada.
Life Insurance
Critical Illness Insurance
Why Should I Consider Life Insurance For My Children (or Grandchildren)?
Life insurance planning for kids and grandkids is very different than adults. The main difference is that you are planning for their future benefits, rather than ‘what if’ scenarios. Realistically, kids are not earning income and don’t need term insurance the same way that adults do. Since life insurance is based on age and health, kids insurance premiums are significantly lower than their parents or grandparents. Early planning is a great opportunity for insurance-based investment strategies that can build cash values and protect their future insurability.
Are There Different Types of Life Insurance for Kids?
Most people look at whole life insurance policies when they are considering options for their kids. These policies can be paid up in a defined period (as early as 8 years) and is then in force permanently. The policy has a low-risk invesment component that builds up cash value. The ownership of the policy and it’s associated investment, can be gifted to the kids (when they’re older and financially read). If you are a grandparent setting up a policy, you can set up a contingent ownership to the parents.
How Much Life Insurance Should I Get For A Child?
Choosing whole life insurance benefits for kids is usually based on budget. In other words, how much is reasonable for you to commit to pay (invest) either monthly or yearly. We recommend considering that you own insurance needs are met and you have a conversation about any education planning you want to do. Beyond that, any amount you choose is helpful. Even a small(er) policy will be a very meaningful gift when they are older.
How Much Does Whole Life Insurance For Children Cost In Canada?
The following rates are based on a market survey of all insurance providers offering whole life insurance for children in Canada. Monthly rates are listed based on the lowest monthly premium. Please be aware that companies offer different cash value and dividend options and we encourage anyone shopping for whole life for children to review more detailed illustrations (which we can help with) and understand what is guaranteed versus what is estimated or projected.
3 year old female
$33.81/month
$100,000 benefit + cash values
payable in 20 years, lifetime benefit
8 year old female
$38.61/month
$100,000 benefit + cash values
payable in 20 years, lifetime benefit
15 year old female
$50.88/month
$100,000 benefit + cash values
payable in 20 years, lifetime benefit
3 year old male
$39.47/month
$100,000 benefit + cash values
payable in 20 years, lifetime benefit
8 year old male
$47.43/month
$100,000 benefit + cash values
payable in 20 years, lifetime benefit
15 year old male
$62.28/month
$100,000 benefit + cash values
payable in 20 years, lifetime benefit
As you can see, the cost is higher per month for a male compared to a female (sorry guys!). The cost increases depending on the age of the child when the contract starts. The payment is fixed for 20 years, afterwhich the policy is paid in full and remains in place for the lifetime.
Another reason to start younger? Cash value. And while we know money isn’t the only thing in the world (health and happiness first, right?). A younger starting age means there is more time for the investment portion to grow. The cash value increases and is tax-deferred.
Is Whole Life Insurance Right For My Kids?
Whole life insurance for kids can be a great fit for many families. For example:
- Parents that want to invest for their kids to build an investment with cash value;
- Grandparents that have flexibility in their budget to plan for wealth transfer;
- Providing future insurability for dependents, so they are insured no matter if their health changes in the future.
How Do Whole Life Policies Work?
In an investment world where guarantees are rare, whole life policies can be a great fit because of all their benefits. The are a unique and stable investment that parents and grandparents can purchase to provide for their family’s future well being (financially).
1 |
Guaranteed premiums, cash values and death benefits |
2 |
Multiple plan options for short and long term financial goals. |
3 |
Choice of payment options in which premiums can be paid for a set number of years, or a life pay. |
4 |
Deposit options for maximizing tax-advantaged growth. |
5 |
Ability to choose a “participating” or “non-participating” account. The participating options can include additional dividend payouts. |
6 |
The cash-value can be accessed in later years to help with education funding. |
How Can Children’s Whole Life Policies Be Customized?
Just like adult insurance policies, there are options (sometimes called riders) that can make up part of the contract. Some insurance providers include benefits at no extra charge while others have riders that you can pay to have included in the policy.
Examples of riders include:
Death & Disability |
Ensures that the premiums will continue to be paid if the person that is paying for the policy dies or becomes totally disabled. |
Guaranteed Insurability Benfit |
Guarantees the right to purchase additional life insurance in the future without providing medical evidence of health or insurability. This means that if the child develops an illness or condition that would otherwise make them uninsurable, they can still top up their life insurance. |
Critical Illness Insurance |
Additional insurance that can be added. This insurance provides a tax-free single payment should a child be diagnosed with a condition such as cancer. |
Accelerated Deposits |
Allowance for extra deposits above the set premium to help mazimize the tax-advantaged investment growth within the policy. |
How Much Cash Value Does A Whole Life Policy Build?
“It depends”. Mostly on how much insurance is purchased as well as the different plan options (long versus short term) you choose. And while we’re sorry that our answer isn’t as specific as you’re looking for, we can describe how the cash values accumulates.
The following is an example from Equitable Life, they offer two Equimax products: Equimax Estate Builder and Equimax Wealth Accumulator.
The Equimax Estate Builder does not build the savings component as quickly. In the long run though, it is projected to have a higher tax-advantaged cash value.
(please note that this is for illustration and display purposes only and we can provide detailed illustrations).
Does It Make Sense To Buy Critical Illness Insurance For Children?
Are you and your family financiall prepared to survive a critical illness such as cancer, heart attack or stroke? What is something happened to one of your children (or grandchildren)?
We recognize that this is not a pleasant topic, but that doesn’t mean it isn’t important. For many people, imagining our child geting sick is worse than imagining our partner bring ill. Would you be able to take time off work and still keep up with your bills? What about traveling to be near Children’s Hospital?
The good news is that children are way less likely to get sick than adults. This means that the cost for critical insurance is lower too. And while it’s great that the cost is lower, the impact of not having this type of insurance might be significant. We recommend that families that can afford to purchase critical illness have at least a little bit in place.
What Is Different for Critical Illness For Children Compared to Adults?
The critical illness policies for children also include a couple of additional illness that are not part of a policy for adults.
Covered conditions do vary by insurance provider, and can include:
Cerebral Palsy |
Muscular Dystrophy |
Congenital Heart Disease |
Type 1 Diabetes Mellitus |
Cystic Fibrosis |
Autism* |