Why Buy Life Insurance for Children?

Life Insurance for Children is a Gift

Getting life insurance for children is generally simple when your child is born healthy and happy. However, getting an insurance policy on your child can become extremely problematic once they have been diagnosed with a physical or mental health issue. The insurance companies are unwilling to take on the risk of providing life insurance for children who have health issues; they are concerned that children might become worse as they age and develop serious complications into adulthood. Insurance companies see the risk as too great, and would rather wait to see that children with health problems either out-grow them or become stable into adulthood before offereing insurance. Some childhood illness, like Juvenile Diabetes, will make it near impossible to get life insurance for children forever.

You may ask – why buy life insurance for children anyway? There are two main reasons why parents or grandparents buy life insurance for their children.

The gift of insurability

With the onset of so many childhood diseases such as Juvenile Diabetes, Asthma and Cystic Fibrosis, the ability for these children to get personal life insurance even into adulthood can be very limited. Even if they qualify for an insurance policy later in life, it is likely they would pay an increased premium (a rated policy) due to the ongoing medical condition. The worst case scenario is they would never qualify for a personally owned life insurance policy which many Canadians take for granted. By purchasing life insurance for children early, a parent can lock in the child’s ability to get life insurance, because once it is in force, it can never be taken away from the person insured. The policy remains completely in the control of the policy owner (the parent) for the benefit of the person insured (the child).

Life Insurance as an investment vehicle

Purchasing life insurance for children can be a very powerful savings tool. It allows the parent to save money in a policy fund or cash surrender value far above the minimal premium required to insure the child’s life. The excess dollars invested can be put into a self-directed investment portfolio with a variety of interest or market based returns. The growth of money inside a life insurance policy is tax deferred, meaning there is no taxation on the interest earned on the money. This allows compound interest to become very powerful inside an insurance policy over time. The funds can then be used by the child, later in life, for things like education, purchasing their first home, starting a business, etc. The underlying insurance policy can remain in force while the excess investment portion can be taken out.

The Solution – Purchase Life Insurance for Children Now

Parents or grandparents can purchase insurance on their children at a very young age. Most insurance companies will issue a policy 14 days after a child is born. As long as your child is born healthy, with no common birth defects, they are easily insured. Most childhood onset illnesses and diseases (both physical and mental) are not obvious at this age or have not yet occurred, making this is a great time to get your child a policy and avoiding any insurability issues that may arise in the future.

Feel free to contact us at Life Guard insurance for further information about getting an insurance policy for your child in Canada.