Why take out life insurance for my child?
We all know how important it is to have life insurance, but it’s a much more emotional decision to make when it comes to children, especially if they’re young. Here are some factors to help you decide.
Life insurance for children: protecting you and them
The number one reason for purchasing life insurance coverage is to compensate for the loss of income a death in the family would create. Obviously, young children don’t have any income to speak of. But if they were to die, you would surely need to take some time to grieve and come to terms with the shock.
The amount of children’s insurance coverage you receive could enable you to:
- Take a period of time off work to grieve without having to worry about your finances
- Cover the funeral costs, which could be as high as $10,000
Is it important for new parents to get insurance for their children?
Kids come into our lives full of magic and big dreams. But let’s be honest—they also bring a whole new set of responsibilities for parents, which can become worries as well. That is why making sure your children are protected is so important.
It could mean getting accident insurance for babies, often offered by insurers at low cost, sometimes even free.
It could also mean getting critical illness insurance for your child, so you can take time off work to care for your child if they become seriously ill. Since the odds of this happening are low, the insurance is usually quite affordable. For kids between the ages of 2 and 5, coverage might even include some extras.
What is the youngest age for insuring a child?
You can ensure your baby from the very first week of life!
A good way to guarantee your children’s long-term insurability
By taking out children’s life insurance when they are in good health, you’re giving them protection that will stay with them for life. This can be a huge advantage for your kids, especially if their health declines. For instance, a child diagnosed with a critical illness that would rule out the chances of getting insurance in adulthood could fall back on the life insurance you had the foresight to pay up when they were young.
Types of life insurance for your kids
- Term life insurance: a simple and affordable solution that provides tax-free payments in the event of death
- Permanent life insurance: a solution to cover your financial needs. It’s different from term insurance in that it offers additional benefits, such as a guaranteed surrender value and the option of paid-up insurance
Other advantages of taking out children’s life insurance
- Premium payments are lower due to children’s young age and good health
- Your children could enjoy insurance coverage throughout their lives without having to pay for it all their lives
- You guarantee their future insurability if they decide to keep their insurance when they are adults. Depending on their needs, they can convert it into a:
- Some insurance policies, such as critical illness insurance or accident insurance, allow you to add more coverage.
- If your child were to die, you would have financial protection that would enable you to cover your financial needs and take the necessary period of time you need to grieve
Similar premium payments, different coverage amounts
Looking at different types of life insurance, the comparison between the premium for permanent and term insurance is particularly interesting. Here is the calculation to cover a 12-month-old boy:
| Permanent insurance | Term insurance | |
|---|---|---|
| Coverage length | 20 years* | 20 years |
| Face amount | $50,000 | $400,000 |
| Annual premium | $469.50 | $444 |
Although the difference in premiums is minimal, the face amount is very different.
The advantage of permanent insurance is that the annual premium stops after 20 years, but the adult child continues to be insured.
In addition, term insurance can be a solution to maximize coverage for short-term needs, while permanent insurance may be better suited to long-term needs.
Ultimately, a financial advisor will be able to guide you towards the best option for you, based on your financial situation.
Tip
Use our term life insurance calculator to get an idea of the premium you'll have to pay, based on your family's needs and financial situation.
If I choose term insurance, what happens at maturity?
You can renew your term insurance or convert it to a permanent policy at the end of the term.
It's important to note that the premium for term insurance can increase significantly when the policy is renewed at the end of the term, mainly because of the insured's increased age.
Can grandparents take out life insurance on their grandchildren?
Yes, grandparents can insure their grandchildren without their written permission, since the grandchild is a person whose life is of interest to them.
How do I take out life insurance for my child?
A financial advisor is the best person to help you assess your needs and guide you towards the product best suited to protect your heirs. If you already have an iA advisor, contact him or her. Otherwise, visit the Find an advisor section.
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