Pros and cons of children’s life insurance in Canada

Keeping children safe is a top priority for any Canadian parent. Should children’s life insurance be part of that discussion?

It’s tough to contemplate what life insurance implies with regard to one’s child. Fortunately, children’s life insurance policies are about much more than the death benefit.

Life insurance for children in Canada can be an important investment and savings tool, and safeguard for future insurability.

What is children’s life insurance?

Children’s life insurance is a whole life insurance policy purchased for a minor by their parent or grandparent (the policyholder).

The policy remains in force for the covered child’s entire lifetime (including into adulthood) and can generate dividends during this entire period (as long as the policyholder keeps up with premiums). This provides the covered child with both lifelong insurance coverage and a head start on their financial savings and monetary goals if they choose to access that cash value.

This can help them fund their first car, home, or even their education; going with whole life insurance for your child provides an even wider array of options as well.

Pros of children’s life insurance in Canada

In the very unfortunate (and hopefully unlikely) event that your child dies at an early age, the death benefit from the policy can help alleviate any costs associated with that event. This can include funeral expenses, taking time to grieve, or private counselling.

Other advantages of children’s life insurance that the covered child can avail of are:

• Life-long coverage for the insured child. This can prove incredibly helpful if a child is diagnosed with any critical illness or health conditions that may impact their insurability down the road.
• Children’s life insurance policies generally offer lower premiums due to the young age and relative health of the insured child. Because of this, limited pay (paying down the entire policy in a short amount of time) can become an attractive option because of the lower cost.
• Children’s life insurance can also be used as a savings vehicle as mentioned above, or a more flexible alternative to a Registered Education Savings Plan (RESP).

Cons of children’s life insurance in Canada

There are some downsides associated with children’s life insurance as well, although they don’t apply to every situation. Some of the common ones would be:

• Children’s life insurance policies can offer a lower rate of return compared to other investment options. The cash value component of children’s life insurance won’t beat a dedicated investment vehicle. With that said, no investment scheme will offer the included insurance benefit of a children’s insurance policy.

• It’s a long-term commitment. For children’s insurance to make sense as both protection and investment, the policyholder needs to consistently pay the policy premiums for the required payment period. If one lapses on payments, many of the benefits (like guaranteed future insurability) will be in jeopardy.

Children’s life insurance has the potential to be a great gift for your child or grandchild should you choose to apply for a policy. Providing both future insurability and a financial asset can give them a headstart on their path to adulthood. Educating yourself about the policy’s possibilities and limitations can help you decide on the best coverage for your loved ones.

How can you get the best life insurance for children in Canada?

Finding the best life insurance for your child in Canada involves careful consideration of coverage features, costs, and long-term benefits. Start by comparing policies, focusing on options like whole life or term-to-100 insurance. Look for policies offering guaranteed insurability and flexible ownership transfer, ensuring your child can maintain coverage as they grow.  

Finding the right life insurance for your child can be a difficult decision, and this is exactly where PolicyAdvisor can step in for you. We work with the best insurers in Canada, allowing you to compare comprehensive options and secure affordable rates. 

PolicyAdvisor also provides lifetime after-sales support, ensuring you have guidance anytime you need it. Combining strategic planning with expert advice ensures the best protection for your child’s future.

Frequently asked questions

Can life insurance for children help with their future financial planning?  

Yes, certain life insurance policies, like whole life insurance, accumulate cash value over time, providing a financial asset that can be accessed later. This cash value can be used for milestones such as funding education, starting a business, or purchasing a home, offering a head start on your child’s financial future.  

Are medical exams required for children’s life insurance in Canada?  

Most life insurance policies for children in Canada do not require medical exams, as they are generally healthy. Insurers usually base approval on a simple health questionnaire, making it easier and quicker to secure coverage for your child.  

What happens if I stop paying premiums on my child’s life insurance policy?  

If you stop paying premiums, the policy may lapse, and coverage will end. However, some policies offer options like using accumulated cash value to cover premiums temporarily or paid-up additions, which provide reduced coverage without further payments. Review the terms of your policy for specific options.  

Can siblings be added to the same life insurance policy?  

Yes, some insurers offer family life insurance plans that allow coverage for multiple children under one policy. These plans can be cost-effective and simplify management by consolidating premiums and coverage into a single policy. Always check if such options align with your family’s needs.