You hold your sleeping baby in the delivery room, you marvel at their newfound life, and think about the world that awaits them. It’s a precious moment, one you’ve spent months preparing. An entire life is now dependent on you, one who will be affected by your every decision.
You never want to imagine anything happening to your child, but what if the baby gets sick? It’s hard to think about getting insurance for children. A child’s insurability (i.e. their health) can change quickly and unexpectedly and having life insurance for your child can guarantee a lifetime of worry-free coverage. Having a new baby adds new expenses, but life insurance doesn’t need to be costly. Here’s everything you need to know about getting life insurance for children in Canada.
Does a child need life insurance?
No one wants to talk about getting life insurance for children, as it means considering the unthinkable. Heck, parents are busy enough trying to get their child to sleepor stop crying, so they may not even consider it.
Life is unpredictable, and an insurance policy for your new baby or young child could make life a lot easier should the unthinkable occur. Many families with sick children take time off work, and incur major financial losses. Life insurance can’t replace loved ones, but it could help you carry on.
If we put emotion aside for a moment, almost 2,000 Canadian babies die before their first birthday each year, which is a mortality rate of around 0.5% (source). That doesn’t seem high, but it’s the same mortality rate as 55-60 year olds, most of which will have life insurance. From that perspective, getting life insurance for young children seems quite reasonable.
Life insurance coverage options for children
There’s more than one way to get life insurance for children, and some require nothing more than a phone call to your current provider. Here are the main options:
- Child Term Riders (CTR): If you already have your own life insurance, one of the cheapest ways to get insurance for your children is with a CTR. These riders typically offer guaranteed insurability up to a certain age, usually 21-25. This is the age at which your baby-turned-college-grad can purchase their own life insurance policy without supplying a medical.
- Stand Alone Term Renewable Coverage: This is a child’s own insurance policy, and can be renewed at predetermined intervals without supplying additional medical evidence. Before these policies expire, you can convert them to permanent or whole life policies.
- Insurance for life (Whole life or Universal life): This is the most expensive solution with the most comprehensive coverage. It pays out regardless of when the insured passes away, but the premiums are much higher. There is an investment option available sometimes, but don’t consider it over a TFSA or RRSP for investing. Unless you’re a very high net worth individual, whole or universal life inurance for children is probably not the right option.
The price of any policy depends more on the type of coverage and less on the insurance company used. However, you should look closely at your life insurance quotes to see what different insurance providers cover under their policies. Actual coverage can vary significantly from one provider to another for plans that appear to have a similar price.
Life insurance for children: rates and providers
A Child Term Rider (CTR) is generally the best way to purchase life insurance for children. Here are a few of the CTRs offered by the larger life insurance companies in Canada:
- Manulife offers a CTR for $2.50 per month for $10,000 of coverage. At age 25, this $10,000 coverage can be exchanged for $250,000 (or twenty-five times the value of initial coverage) of standalone insurance. The child must be assessed insurable when being added to the rider. However, If the child has any health concerns when they apply, they can be denied the rider.
- Canada LIfe offers a CTR for $4.50 per month and can also be exchanged for $250,000 of standalone insurance later in life. To qualify, the first baby has to have been born and the child is deemed healthy, and therefore, insurable. Any child born after the CTR is in place can be added 15 days from their birth with no evidence of insurability required and no change to the $4.50 per month, regardless of the number of children eventually insured.
- Foresters offer the ability to add a CTR at no additional cost to your own insurance. The child can be added 15 days after their birth and following a health assessment. The rider is $10,000 of face value and can be converted to five times that value ($50,000) when moving to a standalone insurance policy when the child reaches the age of 16.
It’s always best to get all the details and compare the pricing, plans, and available options.
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When can you get life insurance for children?
Assuming a healthy birth, you can acquire life insurance immediately with a number of insurers. Some insurers have a restriction that the newborn must be 15 days old before they will insure the child, while other providers require the child to be even older.
The wait time to enactment depends both on the insurer and the children’s life insurance product you pick. You’ll have to truthfully answer questions about the child’s medical history, which may include family medical histories.
Know that insurers cannot ask if you’ve previously undergone genetic testing for your child. However, if one of the your family members has an inheritable condition, the insurer can deny coverage for the child.
The Bottom Line
So, is life insurance for children neccessary? It’s a decision you’ll have to make for yourself, but it’s generally a cheap and worthwhile addition to your own life insurance policy, through a Child Term Rider. If you don’t have your own life insurance policy, the birth of a child is the right time to consider it! Life insurance will make sure your child is provided for in case something happens to you. Get multiple life insurance quotes to find the policy that’s right for you.
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