Life Insurance for Children
Life insurance policies are not something we typically consider. The thought of a child carrying life insurance is often viewed as unnecessary or creates an uncomfortable feeling for the parents or grandparents looking to set up the coverage. However, there are several benefits to securing a life insurance policy for your child.
As you can imagine it is a lot easier and cheaper to get life insurance for a 2 year old than a 32 year old and that is why the premiums are often very low. I know this can be a touchy subject, but it needs to be understood. Typically, life insurance companies will provide coverage for children at very low premiums because the risk of them having to draw from their plan is very low.
One of the major bonuses to this is with life insurance policies you can elect to do a limited-pay plan. With a limited-pay plan you pay the premium for a set amount of time, say 15 years, and after that time the policy is paid for. You know what that means? You just set your child up with a life insurance policy for the rest of their lives without having to pay premium year after year after year.
The major reason to set your child up now is the benefits this can yield for them in the future. Setting your child up ensures their future insurability. As you can imagine obtaining a life insurance policy after you have been diagnosed with a medical condition can be very difficult and in some cases impossible. Universal life insurance policies, once issued, remain in effect as long as payments continue being made. This guarantees your child will be able to have coverage in the future regardless of their condition.
It is important not to group life insurance into one big category as there are different policies. I mentioned universal life insurance policy earlier; this is not the same as a term policy. A term policy only protects a short-term risk and thus wouldn’t provide the same benefits as a universal policy.
With a universal policy there are also savings options for your child. Suppose you are contributing to your child’s RESP and are maxing out the contribution but have extra funds you want to place into savings for your child. Well with a life insurance policy you can! Most life insurance policies allow you to top up premiums each month with the extra money going directly into a savings fund. Now not only are you establishing insurance for your child but you are also saving money for them inside a tax-free plan.
Life insurance for children is not always something we consider or like to think about, yet it can have a major impact on our children and their future. Obviously cost is an issue and something to consider as this won’t be a viable option for everyone. However if you have money available and are able to contribute to a universal policy, you should do it. Your child will thank you!
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