Buying life insurance for your child can be an emotionally difficult decision. As parents, we never want to think about the unimaginable happening to our little ones. However, being prepared with life insurance can provide financial protection and valuable benefits beyond covering funeral costs.
This guide examines everything you need to know as a Canadian parent when considering getting life insurance for kids. Lifebuzz.ca will cover the pros and cons, types of policies available, costs when enrolling your child, application requirements, and final thoughts to help you make an informed decision.
Do You Need Life Insurance for Your Children?
The first question many parents have is whether life insurance for kids in Canada is necessary. Here are the key reasons why getting coverage can be worth it:
- Provides a safety net in case of tragedy: While very rare, children can unfortunately pass away, whether due to illness, accident or unforeseen tragedy. Life insurance provides funds to cover funeral and burial costs, which average $7,000-$10,000 in Canada. It also helps replace potential lost income as parents grieve.
- Sets up future insurability: Getting life insurance when children are young locks in insurability if a health condition develops later. Converting to adult policies is often available without medical exams.
- Offers potential savings: Premiums are lower when policyholders are young and healthy. Buying coverage early can save money over lifetime costs.
- Cash value: Permanent policies build up cash value that can help pay for future costs like college tuition.
- Allows policy customization: Parents can adjust policies as children age, such as increasing coverage for milestones like getting married or having kids.
- Provides lifelong benefits: Permanent life insurance builds cash value that can be used for major expenses like education, weddings, or down payments.
While valid reasons exist, life insurance isn’t mandatory for children. Assessing your family’s finances, budget, and insurance needs is wise before purchasing.
Who Might Not Need Life Insurance for Kids
Certain situations where child life insurance may not be the best use of funds include:
- Tight budgets without room for additional expenses
- Prioritizing other goals like retirement savings or debt repayment
- Having existing policies with child riders that offer sufficient coverage
- Only needing basic coverage, like funeral costs, term insurance can provide
- Wanting to wait until kids are older and higher coverage amounts make sense
As with most financial decisions, your family’s unique situation will determine if getting family life insurance for minors or dependents is right.
Options for Your Children’s Life Insurance Policies
If you decide to get life insurance for kids, you must evaluate the two main policy types available and weigh their advantages and disadvantages.
Term Life Insurance for Kids
Term life insurance covers a set period, typically 10 to 30 years. It only pays out if the insured dies within the term. These policies are best for temporary needs like replacing lost income.
Pros:
- Low-cost premiums ($200-$500 annually, depending on the amount)
- Simpler application process
- Conversion options to permanent insurance later
Cons:
- Coverage expires if not converted at the end of the term
- Premiums increase at renewal
- No cash value accumulation
Term life insurance offers an affordable way to gain basic coverage during childhood that can convert later to permanent insurance with higher death benefits.
Permanent Life Insurance for Kids
Permanent life insurance provides lifelong coverage as long as premiums are paid. It also builds cash value that can be borrowed against or withdrawn. The main types are whole life and universal life.
Pros:
- Lifelong coverage
- Cash value accumulation
- Stable premiums that don’t increase
- Fund access for significant expenses
- Dividends with participating policies
Cons:
- Considerably higher premiums ($500-$5,000 annually)
- Less death benefit per premium dollar
- Lower cash value growth than other investments
Permanent policies provide the security of lifelong coverage and the potential to use fund accruals for future needs. However, the premiums are much higher than those for term insurance.
When choosing between policy types, weigh factors like budget, reason for coverage, and desire for lifelong benefits. Many families first opt for inexpensive term policies, converting to permanent insurance as kids get older and coverage needs increase.
You can also explore life insurance for Canadian parents here.
What Age Should You Buy Life Insurance for Children?
There is no set age when you must get life insurance for kids. Many companies allow enrollment starting at 14 days old. Here are some common scenarios that may impact your decision:
- Newborn: Wanting a policy for the unexpected loss of a newborn. Some term insurance allows coverage starting at two weeks old.
- Toddler: By 12-24 months, minimizing risk conditions in infancy allows better premiums.
- School-aged: Adding coverage as kids become more independent and face new risks.
- Teenager: Increasing coverage for driving, summer jobs, and college planning.
- Young adult: Ensuring lifelong insurability before health conditions potentially arise.
Statistics in Canada show that the highest childhood mortality risk is in the first year. So, for families wanting early coverage, infant or toddler policies make sense. But any age can work, depending on your risk, comfort and budget.
How Do You Apply for and Purchase a Life Insurance Policy for Your Child?
Buying life insurance for kids follows a similar process to adult policies. Here are the typical steps:
Decide on policy type and coverage amount
Evaluate your budget, the reason for insuring your child, and the level of coverage you need. Term or permanent death benefit amounts from $10,000 to $500,000 or more.
Choose an insurance company
Research insurers like SunLife, Manulife, RBC, and others. Compare policy types, prices, conversions, ratings, and customer service.
Complete the application
Applications require basic information on your child, like age, health, family medical history, and SIN. You’ll also provide ID, income, and contact details as the owner.
Get medically underwritten
The insurance company will assess your child’s health background. This typically only involves a basic questionnaire unless large policy amounts require a paramed exam.
Get approved and pay the first premium
With approval, you’ll set up payments through pre-authorized bank debits. The parents pay premiums until a child reaches adulthood.
Designate beneficiaries
Name beneficiaries who will receive the death benefit payout. For minors, this is usually the parents initially.
The application process is relatively straightforward. An advisor can assist you through every step as well.
What Information Do You Need to Buy Life Insurance for Kids?
When applying for children’s life insurance, you’ll need to provide some critical information. Have these details ready to make the process easy:
- Your child’s full legal name, birthdate, and contact information if old enough
- Your identity information, like SIN, driver’s license, proof of address, and income docs
- Family medical histories for conditions that could impact insurability
- Your child’s medical history, including any illnesses, disabilities, or significant injuries
- Names of your preferred doctor and dentist for your child
- Beneficiary designations stating who will receive policy payouts
- Initial premium payment to activate coverage after approval
This information allows insurers to accurately assess risk and process applications efficiently.
How Much Does Life Insurance for Children Cost in Canada?
Life insurance for kids premiums vary based on factors like:
- Type: Permanent insurance costs significantly more than term insurance.
- Amount: Higher death benefits mean higher premiums. $100,000 costs more than $25,000.
- Age: Newborns are priced higher than older children due to infant mortality rates.
- Health: Serious illnesses may increase premiums or disqualify eligibility.
Some sample premium costs for healthy children are:
- Term: $200 annually for $25,000 coverage
- Whole life: $2,000 annually for $100,000 coverage
Permanent insurance bought at a young age offers lower lifetime costs since premiums don’t increase. But term policies provide fundamental coverage affordably until more substantial needs arise.
Final Thoughts on Applying for Life Insurance for Kids Canada
Having life insurance for kids can provide financial safeguards and valuable lifelong benefits. As parents, we naturally want to protect our children in every way possible. Assess your budget, existing coverage, and need for peace of mind before buying a policy.
The younger you enroll your children in life insurance, the lower the long-term costs. Work with an experienced insurance advisor to review your options and ensure you get the right policy.
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