February 16, 2023

Do I need life insurance for my baby?

By Kristen Mayne

Getting life insurance for your baby can help protect you financially from the unthinkable. But there are other benefits too.

Thinking about life insurance for your child may not be pleasant but it’s practical. It’s worth considering for several reasons, says Sun Life advisor Namrata Patel.

“Life insurance for your child is protection that can give you time to grieve if the unthinkable happens,” shares Patel. “You don’t want to have to rush back to work so you can pay the bills. Then there are also funeral costs to consider. These can cost thousands of dollars. A life insurance policy can save your family money and financial stress.”

Another reason to consider insurance is that it’s likely to be less expensive because they’re young. “This means you can secure a low monthly premium*,” says Patel. “And when they reach adulthood, your child can likely convert to an adult policy without a medical exam. And at a cost based on when they were younger and healthier.”

And lastly, getting life insurance when your child is young helps ensure they’ll have insurance as an adult, says Patel. “Your child may be healthy today, but they might develop a condition which makes getting insurance challenging later. This can include diabetes and autism.”

(*Premiums refer to monthly or annual fees.) 

What are the life insurance options for babies and children?

Patel says there are two main types of life insurance coverage to consider:

1. Term life insurance for babies and kids

Term life insurance gives you coverage for a set period of time that you choose. This can be five, 10 or 20 years. Or up to a specified age, like 25. Term life insurance policies can be less expensive than permanent life insurance. But unlike permanent life insurance, they don’t accumulate cash value.

In Canada, there are two ways to get term life insurance for your child. If you already have an insurance policy for yourself, you can add your child to your policy. Insurance companies call this a child term rider (CTR). The other option is to buy a separate policy for your child.

Cost: The premium for a Term insurance policy can be as low as $5 a month.

Benefits: This is a cost-effective way to get insurance for your child.

Drawbacks: The benefit coverage is lower than what you’d get with permanent life insurance. The lowest premiums will offer around $10,000 worth of coverage. And it generally tops out at around $30,000.

2. Permanent life insurance for babies and kids

There are a few types of permanent life insurance – participating life, whole life or universal life. As the name suggests, permanent life insurance lasts a lifetime. As a result, it tends to be more expensive than a term policy. It also builds cash value that you can invest to grow your money over time. You can then borrow from your cash value as a loan or withdraw funds from it.

Cost: This depends on your policy and how much cash value you’d like to accumulate. Premiums can be $50 a month or more.

Benefits: Your child will have coverage for life, as long as the premiums are paid. So, they never need to worry about renewing their policy. And when they’re older, your child can use the cash value and/or dividends to help pay for any major costs like tuition, a car or a home.

Drawbacks: Permanent life insurance premiums can be more expensive than term life insurance. And you’ll pay premiums for a lot longer in comparison. The investment growth is often lower than conventional investment options.

Not sure what type of insurance you need to best protect your family?

Sun Life advisor can help you understand the different products available.

Can grandparents pay for life insurance premiums?

Absolutely, says Patel. “As long the parent gives consent, a third party (like a grandparent) can pay the premiums. The owner of the policy is the parent(s), but a payment option is set up so that someone else pays for it.”

How do you know what’s right for your family?

When it comes to life insurance, there’s no one-size-fits-all solution. You can ask an advisor for help. They can analyze your needs and suggest the right type of insurance protection that suits you and your family. When you’re ready, you can get life insurance for your baby or child with one of these 2 options:

  1. Apply for life insurance online. 
  2. Find an advisor. Talk to a Sun Life advisor who can help you understand your options. 

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This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.

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