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Baby life insurance in Canada – what you need to know

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With files from James Battison.

This post was originally published on May 31, 2022, and was updated on February 28, 2024.

Having a baby is one of the most significant experiences in a person’s life. You may feel overwhelmed at first, but things do settle down. There are many things to consider as you adapt to all of the changes a baby brings to your life, and insuring the life of that baby may not be high on your priority list. However, life insurance for babies is something parents should consider as there are many benefits to securing this coverage for your child at an early age. 

Here is the information you need to determine whether it’s worth getting life insurance for your child.

Key takeaways on baby life insurance

  1. There are several benefits to buying coverage for a baby – you can lock in a low premium early on and ensure your child can be covered throughout their life, even if they develop health conditions. Plus, with permanent life insurance policies, you can build a cash value fund for your child to access throughout their lifetime.

  2. However, cons to purchasing life insurance for a baby include the long-term commitment and low rate return of cash value – many argue that there are far more efficient methods of saving for the future.

  3. The two main types of life insurance you can purchase for your baby are term life and whole life insurance – term life policies often come with a child term rider, so you can insure your child under your own policy for an affordable cost.

Can I take out life insurance for my baby?

Yes, you can certainly take out life insurance for your baby. Thinking about life insurance for your newborn baby may feel a little dark, but it’s never too early to purchase a policy for them. 

Purchasing an insurance policy for your baby can help take away some of the stress should the unimaginable occur. If something were to happen to your child, a life insurance policy would cover things like funeral expenses and income lost by taking time off work, giving you and your family the space you need to grieve. 

Life insurance for your baby doesn’t need to be a major investment. Term life policies for babies can often be purchased as add-ons to your own policy, or you can acquire a standalone policy specifically for them. Term insurance is also affordable and premiums can be as low as $3 a month.

Premiums on a whole or permanent insurance policy are more expensive, but these policies have the benefit of a cash value option. We’ll discuss this in greater detail later, but in short, this cash value allows you to accrue interest on your investment and can be transferred to your child who will be able to borrow against this amount as they get older. 

Is it worth getting life insurance for your child?

There are pros and cons to buying life insurance for a child. Let’s take a look at the benefits and limitations of purchasing these policies early in a person’s life to help you determine the best path forward for your family. 

The pros of baby life insurance: 

Guaranteed insurability: Many adults with serious health conditions are unable to purchase life insurance because of their high level of risk. Since most babies and young children are healthy, buying insurance at an early age ensures the child can be covered throughout their life, even if they develop health conditions or risky hobbies.

Lower premiums: Insurance premiums are based on the level of risk a policy poses to the provider, and when a child is young and healthy, they pose far lower risk than older, less healthy adults. This means that purchasing protection early in life can lock in lower premiums than if you were to wait until adulthood.

Cash value: Whole or permanent life insurance policies build cash value that could come in handy for your child later in life. If you choose a whole or permanent life policy, a portion of the premiums contribute to cash value, offering the opportunity to borrow against that value in the future, plus the potential for wealth transfer or tax-advantaged growth. When the ownership of the policy is transferred to the child when they reach adulthood, they can choose to withdraw funds from the cash value account or borrow against the policy. This flexibility allows them to use the money to pay for post-secondary education, start a business, help with a down payment on a home, or supplement their RRSP account.

Read: How does age affect life insurance rates

The cons of baby life insurance:

Low rate of return: While many life insurance policies do build cash value, this typically happens at a low rate of return, and many would argue that there are far more efficient ways to save for the future. When buying life insurance for a newborn, it usually takes about 15 years before the cash value adds up to the premiums paid. However, if you invested the same amount of money into a fund that yields a modest 7% return, your money would double in 10 years. 

Long-term commitment: To reap the rewards of life insurance, you must be in it for the long run. People need to understand they will be paying monthly premiums for a very long time, and be prepared to continue with this commitment. 

Compare baby life insurance rates in Canada today.

In just a few steps, we can connect you with a licensed broker to compare personalized baby life insurance quotes for your child.

What is the best life insurance for babies in Canada? 

There are two main policy options when it comes to buying life insurance for your baby: term life insurance or whole/permanent life insurance.

Term life insurance is an affordable way to get your child insured, though it does offer a lower benefit payout. If you already have a life insurance policy yourself, be sure to speak to your provider as it is sometimes possible to have a child term rider (CTR) added to your policy. It’s also recommended to see if the policy is convertible when the child becomes an adult, as this can save them money in the future, and prevent them from having to undergo a medical exam in order to secure their own life insurance coverage.

Whole or permanent life insurance is more expensive than term life, but it offers a cash value benefit that can be a significant help for your baby later in life. Permanent life policies usually grant you the option of purchasing a participating or non-participating policy. Participating policies are those that collect dividends – that is, profits from the investment element of the insurance policy – while non-participating does not.

There are additional options available within both policies, so it’s a good idea to speak with your life insurance company to discuss the options available to you.

The bottom line

Buying life insurance for your baby is about more than just protecting yourself financially if something happens to your child. There are other financial benefits to purchasing a policy for your baby early in their life. While this may be something you would rather not think about, it’s worth speaking to your insurance provider to find out more. And don't forget to compare life insurance quotes to ensure you secure your child's financial protection for the best rate possible. 

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