Life insurance for children is a policy that parents or guardians can purchase to cover their children upon death but usually as a future wealth building tool
Life Insurance for Children: Life Insurance In Canada Explained
Create Wealth With Cash Value for Your Kids Future
Life insurance is a contract between an individual and an insurance company, where the individual pays premiums in exchange for a lump-sum payment, known as a death benefit, to beneficiaries upon the insured's death. Life insurance for children, while not as common as life insurance for adults, is a topic of interest for many parents and guardians. This article will delve deep into the nuances of life insurance for children in Canada, providing a comprehensive understanding of the topic.
It's important to note that the concept of life insurance for children is not without controversy. Some financial experts argue that it's unnecessary, while others believe it can serve as a financial tool for future security. Regardless of the differing opinions, understanding the details of such policies is crucial for making an informed decision.
Understanding Life Insurance for Children
Life insurance for children is essentially a policy that parents or guardians can purchase to cover their children. The policy provides a death benefit if the child passes away and may also offer a savings component, depending on the type of policy. The main purpose of these policies is to cover funeral expenses and provide financial support during a difficult time.
However, it's important to note that the primary purpose of life insurance is to replace lost income, which doesn't apply to children. Therefore, the decision to purchase life insurance for children is often a personal one, based on individual circumstances and beliefs.
Types of Life Insurance for Children
There are two main types of life insurance policies for children: term life insurance and whole life insurance. Term life insurance provides coverage for a specific period, typically until the child reaches adulthood. If the child passes away during the term, the policy pays out a death benefit. However, if the child outlives the term, the policy does not pay out, and coverage ends.
On the other hand, whole life insurance provides coverage for the child's entire life, as long as premiums are paid. This type of policy also includes a cash value component that grows over time and can be borrowed against or withdrawn for various purposes.
Benefits of Life Insurance for Children
One of the main benefits of life insurance for children is the guarantee of insurability. This means that the child will always have the option to purchase life insurance in the future, regardless of their health status. This can be particularly beneficial if the child develops a serious illness later in life.
Another benefit is the potential for savings. Some policies, particularly whole life policies, build cash value over time. This money can be used for various purposes, such as paying for education or buying a home.
Cost of Life Insurance for Children
The cost of life insurance for children varies widely, depending on several factors. These include the type of policy, the amount of coverage, the child's age and health, and the insurance company. In general, life insurance for children is less expensive than for adults, as children are typically in good health and have a lower risk of death.
However, it's important to compare quotes from different insurance companies to ensure you're getting the best deal. Also, consider the long-term cost of the policy. While the premiums may seem affordable now, consider whether they will still be affordable in the future, especially if your financial situation changes.
Factors Influencing the Cost
Several factors influence the cost of life insurance for children. The child's age is one of the most significant factors. The younger the child, the lower the premiums. This is because younger children have a lower risk of death, and the policy has more time to accumulate cash value.
The child's health is another important factor. Children with serious health conditions may be charged higher premiums or may not be eligible for coverage at all. However, most children are in good health and can qualify for coverage at a reasonable cost.
Comparing Quotes
When shopping for life insurance for children, it's important to compare quotes from different insurance companies. Each company uses its own formula to calculate premiums, so the cost can vary significantly from one company to another.
When comparing quotes, look at more than just the price. Consider the company's reputation, customer service, policy features, and financial stability. Also, consider whether the company offers the type of policy you want and whether it has any additional features or benefits that may be important to you.
Controversies Surrounding Life Insurance for Children
While life insurance for children can provide financial security and peace of mind, it's not without controversy. Some financial experts argue that it's unnecessary and that the money spent on premiums would be better invested elsewhere.
They argue that the primary purpose of life insurance is to replace lost income, which doesn't apply to children. They also point out that the likelihood of a child dying is extremely low, so the risk that life insurance is designed to protect against is minimal.
Arguments For
Those in favor of life insurance for children argue that it provides a financial safety net in the unlikely event of a child's death. They point out that funeral expenses can be significant and that a life insurance policy can help cover these costs.
They also argue that a life insurance policy can serve as a forced savings plan, especially if it has a cash value component. The money can be used for various purposes, such as paying for education or buying a home.
Arguments Against
Those against life insurance for children argue that the money spent on premiums would be better invested elsewhere. They suggest that parents should instead focus on building an emergency fund, saving for retirement, and investing in a college savings plan.
They also point out that the risk of a child dying is extremely low, so the need for life insurance is minimal. Instead, they suggest that parents should ensure they have adequate life insurance coverage to protect their children in the event of their own death.
Life Insurance for Children and Life Insurance in Canada: Conclusion
Life insurance for children is a complex topic with valid arguments on both sides. Whether or not to purchase a policy is a personal decision that should be based on individual circumstances and beliefs. It's important to understand the details of such policies and to carefully consider the pros and cons before making a decision.
Regardless of the decision, it's crucial to ensure that the family's financial needs are met. This includes having an emergency fund, saving for retirement, and ensuring that parents have adequate life insurance coverage to protect their children in the event of their own death.
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Life Insurance Need Not Be Complicated
Here are answers to frequently asked questions...
No, the only thing you will ever pay is a premium to the insurance company that provides the life insurance policy for you. We provide you quotes and advice on best options for your situation.
Yes, we have access to various discounts based on your health and the amount of life insurance you purchase. For example if you've never smoked in your life and are buying more than $1 million in life insurance
Rates are based on your age, health history, smoking status, gender and income. The insurance company also compares and makes assessments based on similar individuals with the same profile like age, gender, smoker status. Unlike workplace or association rates which are cheaper and based on you working at a particular company, being associate with an affinity group or the claims of the whole group i.e. your rate is affected by someone who smokes even if you don't smoke, or if you never claim and other claim multiple times, for example.
We simplify the process knowing how busy life gets. The first step is simply to request your quotes and getting a sense of the cost and coverage available. Next, we compare the policy options and other riders like guaranteed insurability and discuss what makes sense for you and answer your questions. Lastly, you apply and buy risk-free.
We are an independent life insurance broker, meaning that we do not have an affiliation with any one Canadian life insurance company. We are looking out for your best interests as we don’t have to meet any requirements to do business with any specific company. We actually get a finders fee from these insurance companies and they are all the same, so we don’t have any financial conflict of interest either.
In most cases, it can take between 2 weeks and 1 month from beginning to end. A lot of the time may depend on follow up information required by the insurance company. In our experience 1 month is usually a standard timeframe. Sometimes, depending on the amount you apply for and your age, for example children's life insurance or no medical, the approval is instant.
Underwriting is where the insurance company verifies your information that you submitted on the application your complete with us and gathers additional details such as health history, travel, and personal history to determine the best rate possible.
Any type of life insurance is great especially if you suddenly pass unexpectedly. However, just like getting a company car allowance, you only have it for as long as you work for that company because it's a benefit or "perk" of working there. When you leave you lose that perk. You are also limited to 2 or 3 times your salary which may not be enough. More importantly, how many times have you changed or will potentially change jobs?
When you buy your own personal private insurance you don't worry about losing it if you change jobs or your health changes.
As the name suggests, the AD & D policy will only pay if your death is caused by an accidental death or dismemberment of a body part. Personal private life insurance will pay regardless of the cause with the only exception being cases such as suicide.