September 9th, 2011 | Author: Mitch Reynolds

Adding a Child Term Rider to Parent’s Policy is a Basic Life Insurance Plan for Children

A Child Term Rider provides risk protection today and converts to personal insurance tomorrow

Child term rider CTR Starting a life insurance plan for your children has never been as easy or as cheap as adding a child term rider to your personal life insurance policy. If you are shopping for your own life insurance plan or even if you already have one, you can add a child term rider (CTR) to the policy to cover all your children for one low price.

The most impressive feature of a child term rider is the conversion option when your child becomes an adult. This allows your child to pull the child term rider out of your policy and convert it into a much larger amount of personal life insurance without qualifying medically for the insurance. So, if effect, you are giving your kids the gift of “insurability” for their future – a gift that becomes very valuable if your child developed a health condition that made him/her uninsurable in the future.

How does a child term rider work?

A child term rider is an add-on to a regular adult life insurance policy. By adding the child term rider to their policy, parents can insure ALL their children with a level amount of benefit for one low monthly cost. Most child term riders offered by different insurance companies will allow parents to buy between $5,000 and $30,000 of life insurance coverage for each of their children.

As I said, the policy has one low cost and all children are covered. You need at least one child to be born in order to add the child term rider to your policy. Your children must be between the 15 days old and age 18 to get a child term rider. You must complete a simplified medical questionnaire for each of your children who are already born. The good news is that all NEW children you have will automatically be added to the child term rider without completing the medical questionnaire.

The child term rider doesn’t last forever. After a period of time the rider will terminate. This is different for each company. Most will only insure children until age 25. Some policies automatically cancel the child term rider after 20 years on the parent policy, while others will cancel when the child reaches age 25 or the parent reaches age 65, whichever comes first.

Let’s look at cost (maximum child term rider across a few different insurance companies):

Sun Life – max benefit of $20,000: $8.10 per month
Equitable Life – max benefit of $30,000: $13.50 per month
RBC Insurance – max benefit of $30,000: $16.20 per month
Canada Life – max benefit of $25,000: $13.50 per month
BMO Insurance – max benefit $20,000: $16.85 per month

The conversion feature of a child term rider

The most important feature of a child term rider is your child’s ability to take over the rider as a personally owned life insurance policy when they become an adult. The child is allowed to take over the life insurance between the ages of 21 and 25 and convert it into any permanent life insurance policy available from the insurance company at the time.

The amount of life insurance that can be converted varies between companies. Most companies allow five times (5X) the base amount of life insurance to be converted without evidence of insurability. Some, like Canada Life, allow 10 times the child term rider amount to be converted. So, in the case of most companies, you could convert a $30,000 child term rider into $150,000 of personal life insurance. Canada Life would allow you to convert a $25,000 child term rider into $250,000 of personal life insurance that your child owns.

The conversion feature can be one of the most valuable financial plans you could ever give your child. If your child’s health was not good, and they developed a childhood disease like juvenile diabetes of cystic fibrosis, they would be uninsurable for a regular life insurance policy when they became an adult. The child term rider conversion option would allow them to get a large amount of personal life insurance without having to qualify for it medically.

Manulife Financial’s unique child term rider

Manulife has a unique child term rider that is different from all others in Canada. They have a small premium PER child of $2.50 per month. This can make the rider a much cheaper option if you have only one or two children. The child term rider has only one death benefit of $10,000 for each child. This is lower than the competition but the conversion feature is much better.

For each of your children you can convert their $10,000 child term rider into $250,000 of personal life AND critical illness insurance at age 25. The critical illness insurance conversion amount is limited to $100,000, but that would still leave $150,000 available for conversion into life insurance. All these conversions are done without evidence of insurability, even the critical illness insurance! The only stipulation is that your child does not have an illness that would immediately trigger a critical illness insurance claim at the time of conversion – like if he or she was currently dealing with cancer they could not get the critical illness conversion. The life insurance conversion for the full $250,000 would still be available, however.

Life Guard Insurance can set up your life insurance with a child term rider for your kids

If you are shopping for your own life insurance and would like to include your kids, or you would like to add a child term rider to an existing life insurance policy, we can help. Feel free to contact Life Guard Insurance to find out more about how to protect your children with a child term rider.

The article was written by Mitch Reynolds+. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about a child term rider would also be very much appreciated.