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Insights & advice

Should I buy life insurance for my child?

July 2022 – 15 min read

Key takeaways

  • Life insurance for a child can help pay for a funeral and allow parents for time off work to grieve

  • Buying life insurance for a young child can help protect their insurability if their health changes

  • There are different types of life insurance you can purchase depending on your needs

  • Some types of life insurance can also help secure your child’s financial future as adults

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Why consider buying life insurance for your child

There are 2 main reasons to consider taking out a life insurance policy for your child:

  • Planning for the unthinkable

    No one likes to think about their child dying, but having life insurance would help to cover funeral costs, and allow you to take time away from work to grieve.

  • Guaranteeing your child’s insurability

    While your child may be healthy now, potential future health issues may make it harder for them to get life insurance later on. Getting them a policy now may allow them to convert to an adult policy without a medical exam, at a cost based on when they were younger and healthier.

Advantages of buying life insurance 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

Types of life insurance policies for children

Parents usually choose between term life insurance and permanent life insurance for their children.
  • 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.

How much life insurance should you buy for your child?

You’d want enough insurance to be able to:·      
  • 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 
 
You may also wish to consider:
  • 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 
Ultimately, you should ensure your child’s life insurance premium easily fits within your household budget.

How to buy life insurance for your child

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)

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.