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Factually, Canada has a mortality rate of 0.5% with approximately 2,000 children babies dying before their first birthday which equals the mortality of 55-60-year-olds.
With life being so unpredictable, putting into account the safety of the future of your loved ones comes as a priority to make life easier in the vent life takes its natural course. This includes newborn babies and younger children. When you have a sick child, the first thing you think about is taking time off work. As much as this is considerate, it is characterized by major financial losses and constraints. While life insurance can’t be a replacement, it makes moving on more bearable.
What is Children’s Life Insurance?
Children’s life insurance is a type of permanent life insurance a parent or grandparent buys for a child who is a minor. While its main focus is to give the child lifelong coverage, it can also act as a saving account whose benefits can be used to meet the financial needs of the child in the future.
The plan has a cash value that accumulates thereby providing your child with security, flexibility and a head start for any financial need in life including education, down payment on a home, or starting a business. Children’s life insurance is a convenient way of providing your child or grandchild with flexible financial security
Advantages of Children’s Life Insurance
- Permanent whole life Coverage
- Affordable premiums
- Insurance is guaranteed
- The availability of increasing benefits
- Tax-free cash value growth
- The cash value can be used as education fees, house, and other needs
- The cash value can be used
Do I need to Purchase Life Insurance for my Child?
Most children’s policies are whole life insurance. Life insurance replaces the regular income of your dependents in the event the sole breadwinner of the family dies. Most people question the worth of children’s insurance because it is costly to maintain. However, child life insurance is worth considering if your child has a condition that will worsen as they age making them unable to acquire life insurance coverage when they are older. To add to that, life insurance rates go up as you age. Securing a children’s insurance plan saves them the horrors of purchasing very expensive life insurance plans in their adulthood.
If the child is healthy, the 529 plan presents a viable alternative saving plan for your child’s future.
Who can purchase children’s life insurance in Canada?
Although rare, parents or guardians should prioritize insurance for their children if the:
- Your child has a health condition that will worsen as they age
- The child may develop serious health conditions early in life as per family medical history.
- The child is the sole breadwinner of the family
However, some parents or guardians may prefer to provide financial coverage for their minors as future financial stability. You can still purchase children’s life insurance if you want to:
- Build a cash reserve for your child
- Establish permanent coverage for your child
- Leave a financial legacy for your minor children
- Save for your children’s education
Every plan has future cash and coverage values that are subject to the dividend scale for a Canadian insurer. You should not that the dividends are not guaranteed making the actual future value of the insurance subjective as well to the premiums agreed upon.
Children Life Insurance as a Rider
Child life insurance rider is an add-on to a purchased life insurance policy and it is designed to pay death benefits in the vent of the death of the insured child. The benefits are meant to help you deal with the funeral expenses and other financial constraints that may arise. Some people opt purchasing child insurance as a rider rather than purchasing a separate life insurance policy. The fact that they are convertible with the ability to transform them into life insurance policies for your child makes them even more desirable.
How does child life insurance rider work?
When applying for child life insurance in Canada, the child needs to be between 15 days and 18 years to qualify. The coverage will remain active until the child is 25 years or you are 65 years, depending on what comes first.
When the insurance coverage is about to expire, the child is free to transform the insurance rider into an individual standalone life insurance policy. In case of this, the child will not undergo any medical exams for approval.
In the vent of the death of the child, the death benefits are paid as a tax-free lump sum that can be used for any expenses or liabilities.
The advantages of child insurance as a rider
- You will need one flat rate rider to cover all your children, including future kids.
- It provides coverage to all your children regardless of the medical conditions
- It can be converted to a permanent standalone policy upon expiry.
- The policy will remain active even in the vent of marriage
Exceptions to purchasing child insurance rider
- If you are considering getting a child insurance policy rider, you need to be aware of what works and what doesn’t. At the top of the list, you need to understand that:
- A policyholder is only allowed to add a child rider if they are between 20 and 55 years of age.
- The policy qualifies all children including unmarried, step and adopted children
- A child insurance rider can’t be used alongside other term riders.
- The Accelerated Death Benefit on a base plan for the adult who is insured doesn’t extend to children with the Children’s Rider add-on.
- Purchase of a child rider is limited to new policies, meaning it cannot be purchased after a policy is in place.
How is a Child Term Rider different from children’s life insurance?
When you buy life insurance, you have the option of purchasing a children’s term insurance plan as a rider for your children before they turn 17. The insurance plan has no cash value, it is temporary and is characterized by substantially lower benefits. The plan will remain active provided all the premiums are paid in due time until the child reaches 25 years or the parent reaches 65 years. Upon its expiry, the child can turn the child insurance plan into a permanent life insurance policy.
On the other hand, children’s permanent life insurance offers permanent coverage. It is characterized by high cash value benefits that are paid to the parents or guardians upon the death of the child and can be purchased as a separate policy from the parent’s policy.
Children’s Life Insurance vs. RESPs
RESPs Vs. children’s insurance: Which Is Better?
Choosing a future financial stability plan for children that is favorable depends on your long-term goals.
You should understand that the federal government of Canada matches contributions made to the RESP saving account although it has an annual limit of $500 and a lifetime limit of $50,000. You should also note that the funds in the RESP account can only be used to fund education in the institution listed on the designated educational institutions. In the event the beneficiary decides to school in an institution that is not on the list, the benefits of the plan may be forfeited.
On the other hand, children’s insurance provides both permanent insurance coverage as well as a saving and investments component that can be used to fund any financial need without limitations. This presents the best alternative saving option for parents who want to secure the future of their children without focusing solemnly on the educational aspect.
Should I invest in children’s life insurance? Is it worth it?
Guardians and parents tend to opt to insure their children for its financial coverage flexibility. This means that the future of the children and the decisions they make will be insured as per the existing financial assets and benefits.
Ideally, children’s insurance is meant to provide a lump sum of cash that is tax-free and can be used in any way the insured child wishes to. In the event of the death of the child, the guardians or parents can use these funds to finance funeral costs or any medical expenses incurred. They can also be used to take time off from work to grieve or get counseling.
One of the biggest reasons that make children’s insurance worth it is the fact that it provides guaranteed insurance and lifelong coverage for the insured. It also has the advantage of tax-free savings account with cash value that can be accessed to fund any possible future expenses of the insured. However, the trick is to apply for child insurance sooner to have a longer period for the growth of the cash value.
These reasons should be enough to convince anyone with children to consider purchasing a children’s insurance policy.
How much is enough life insurance for my child?
The amount of life insurance solemnly depends on how much you want to invest in the future of your child and your current financial situation. While it might be hard, think about the amount you may need to grieve or sort medical expenses in the event the child dies.
On the other hand, one must also consider how much of a financial gift and cash value you want to secure for your children and the available insurance options.
Does children’s insurance require the child to do a medical test?
Children’s insurance does not subject the child to medical exams or bloodwork when applying for coverage. The goal of providing children insurance is to ensure that the child has acquires the lowest premiums, and permanent coverage when they are still young.
What is the cost of children’s life insurance?
There is no ‘one size fits all’ package cost for children’s life insurance. The cost of children’s insurance is customized depending on several factors surrounding their application. This includes:
- The age of the child being insured
- Gender of the insured child
- The total coverage amount
- The insurance service provider
- Is it participating or non-participating insurance provider
- The term duration of the payment plan
Which company provides the best children insurance policy
If you are looking for a reliable children’s insurance policy provider, get in touch. We will help you determine the right life insurance policy for you and your children as well as provide a quote.
Deterring the right insurance policy is essential for proper coverage for the future of your children and yours should the unexpected happen. Choose a service provider that will offer competitive rates, quality services, and reliable life insurance.