July 2022 – 15 min read
There are 2 main reasons to consider taking out a life insurance policy for your child:
- Premiums may be lower because of your child’s good health and young age
- It can help secure your child’s future financial security
- If you purchase an insurance policy with a cash value, your child will have more time for it to accumulate
Term life insurance – It provides the most cost-effective coverage, for a specific length of time. It may be available as a stand-alone policy, or a child term rider to a parent’s term life insurance policy.
Permanent life insurance – It includes features that can help grow money inside your policy over time (called cash value). This money can be accessed during your child’s lifetime. When your child reaches the age of 25, the policy can be transferred to them tax-free. Later in life, your child could have the option to access the policy’s cash value to contribute to things like supplementing their retirement income or establishing a financial legacy of their own. When you purchase permanent life insurance for your child early in life, they’ll always be insured, regardless of any future health problems. Permanent life insurance costs more than term life insurance due to the cash value component.
- Cover funeral costs (up to $10,000)
- Take the time you need away from work to grieve and ease the impact on your family’s finances
- What financial goals life insurance could help your child with
- How life insurance fits into your family’s financial plan, including saving for post-secondary education
Once you decide to get your child life insurance, contact your advisor to get started with this information:
- How much you can afford to spend each month
- Identification for both you and your child (social insurance number, birth certificate, passport)
- Proof of income (pay stub or letter of employment)
- Proof of address (signed lease or letter from your landlord if you rent, or a mortgage or property tax statement if you own your home)
Now that you know more about why you might purchase life insurance for your child, why not meet with your advisor to:
The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.