Do you need life insurance for your baby?

Purchasing life insurance for your baby can help protect you financially should the unthinkable happen. But other advantages are also to be considered.

Do you need life insurance for your baby?

Considering life insurance for your child may not be pleasant, but it is useful. It’s worth doing for several reasons, according to Sun Life Advisor Namrata Patel .

“Life insurance for your child is a financial tool. It gives you time to grieve should the unthinkable happen, she says. In such a case, you don’t want to have to go back to work just to be able to pay the bills. You also have to think about funeral expenses . We often talk about thousands of dollars. Life insurance can save your family a lot of stress and financial worries. »

Another reason to consider life insurance is its cost. It will probably be lower for your child’s age. “You therefore benefit from a monthly premium* which will remain low,” notes Ms. Patel . Once an adult, your child will probably be able to convert his contract without having to undergo a medical examination. And the cost will be based on a period when he was younger and healthier. »

The advisor also points out that a child covered by life insurance is guaranteed to be able to benefit from it as an adult. “Even if your child is healthy today, they may develop a problem later. Diabetes, autism: this will complicate his access to insurance. »

1. Term life insurance for babies and children

Term life insurance protects for a chosen term (5, 10 or 20 years, for example) or until a specific age (25 years, for example). Term life insurance policies can cost less than permanent life insurance policies. But unlike the latter, they do not accumulate cash value.

In Canada, there are two ways to get term life insurance for your child. If you have life insurance for yourself, you can add your child to your contract. Insurance companies call this a child term insurance rider. The other option: take out a separate contract for your child.

Cost: The premium for a term life insurance policy can cost as little as $5 per month.

Advantage: It is an inexpensive way to obtain protection for your child.

Disadvantage: The amount of coverage is lower than that of permanent life insurance. The lowest premiums will provide coverage of around $10,000. The maximum is approximately $30,000.

2. Permanent life insurance for babies and children

There are a few types of permanent life insurance : participating life insurance and whole life (or universal life) insurance. As the name suggests, permanent life insurance lasts for life. As a result, it generally costs more than term insurance. It also has a cash value. You can use it to grow your money over time. You can then borrow against the cash value of your policy as you would a loan. Or, you can withdraw part of the accumulated funds.

Cost: It depends on your contract and the amount of cash value you want to accumulate. Bonuses can be $50 per month or more.

Advantages: Your child will be protected for life, as long as you or he or she pays the premium. He will therefore never have to worry about renewing the contract. And as an adult, he can use the cash value and/or dividends to help pay for a major expense like education, a car or a house.

Disadvantages: Premiums for permanent life insurance can be higher than those for term life insurance. Of course, you will pay premiums for longer compared to term insurance. The growth of the investment is often lower than that of more conventional investments.

Not sure which insurance to choose to protect your family?

Yes. Ms Patel says: “If the parents consent, a third party (eg grandparents) can pay the premiums . The parents retain ownership of the policy, but they set the payment so that someone else pays the premiums. »

How do you determine what is right for your family?

When it comes to life insurance, there is no one-size-fits-all solution. You can seek help from an advisor to choose. He will analyze your situation and propose coverage that meets your needs and those of your loved ones. When you’re ready, you can purchase life insurance for your baby or child in one of two ways: