Life Insurance For Kids: Do You Really Need It?
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July 11, 2024
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Buying life insurance for kids is probably the last thing on your mind when you’re in the middle of raising them. But the early stages of parenthood don’t last forever, and it’s never too early to start planning for your little one’s (or ones’) future.
We’re not just talking about planning their birthday party or saving up for school with a registered education savings plan (RESP), either. It may be uncomfortable to think about, but it’s worth considering life insurance as a way to prepare for even the worst what-ifs.
A life insurance policy for kids isn’t only about the end of life, the right plan can have lifelong advantages. So, tuck the youngsters in for a nap and settle in as we break down everything you need to know about buying life insurance for kids.
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CEO Finsco
Do I need life insurance for my kids?
Life insurance on a child provides financial protection in the event of unexpected tragedy, offering peace of mind to parents or guardians. “Life insurance is about the people who are left behind. You have to think of it as a financial instrument that will give you time to grieve. You don’t want to have to rush right back to work if a child passes away.” It will also provide assets to help with the final expenses, easing the financial burden on the family to come up with funds to pay for everything involved.
Aside from financially preparing for the possibility of an untimely death, life insurance can help protect and secure your children’s health and finances throughout their lives.
One of the biggest advantages to insuring your child is that policies can be converted later in life, usually without a medical exam. “A child could be healthy today, but they might develop diabetes, autism or colitis, which will make getting insurance very challenging as an adult”. If you lock them in with coverage young, they can often convert it into a policy with higher coverage levels as an adult, without a medical exam. This feature means their premiums will likely be based on their healthier, younger selves, and will be more affordable than if they applied on their own with their current health status.
Financially, life insurance can help your child as they get older also. Permanent life insurance policies accumulate cash value over time by the way of collecting dividends or investment options, providing a financial asset that can be used for various purposes, such as education expenses or down payments on a home.
When should I buy a policy for a child?
Some policies can take effect when a child turns just 15 days old. That may seem unduly early, but consider that the infant mortality rate in Canada (for babies under 1 year of age) is around 0.5% —equivalent to the mortality rate of people aged 55 to 60, who are far more likely to have life insurance.
Final thoughts
Buying life insurance for children may not make sense for everyone. Some parents may need to prioritize other financial goals, such as building an education fund, saving for retirement or paying off high-interest debt—to say nothing of simply covering the daily costs of child rearing today. And you should always have adequate life insurance for yourself, before considering coverage for your children, too.
However, children’s life insurance can be the right option for families who can afford the added expense. It can protect you financially from the unthinkable, provide wealth-building opportunities and even make maintaining life insurance easier for your children as they age. Talk to the Statera Financial Planners team to learn more.