We’re not just talking about planning their first birthday party though. Besides saving for their education with an RESP, you should consider life insurance as well. It may be uncomfortable to think about, but it’s worth the effort to prepare for the what-ifs.
“Life insurance is about the people who are left behind,” explains Lorne Marr, director of business development at Hub Financial and founder of LSM Insurance. “You have to think of it as a financial instrument that will give you time to grieve. You don’t want to have to rush right back to work if a child passes away.”
There are sunnier reasons for getting life insurance for your child though. So, while your new babe is having a nap, here’s a quick rundown of everything you need to know about buying a policy for kids.
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Why do I need life insurance for my kids?
Aside from financially preparing for an untimely death, insurance can also help children be protected and secure with their health and finances throughout their long lives.
While some policies—specifically term insurance—are very affordable and are designed purely to provide life insurance, other types of policies cost more but may work harder for you. A “participating” permanent insurance policy, for instance, is also an investment vehicle that collects dividends and accumulates cash. (“Non-participating” means no dividends are collected.) Over the years, you can grow an extra nest egg that can help pay for university, or make a down payment on a first home or car easier.
“A child may be healthy today, but they might develop diabetes, autism or colitis, which will make getting insurance for them very challenging as adults,” adds Marr. If you lock them into a policy now, they can often convert it into a policy as an adult that’s guaranteed without a medical exam. This feature means their premiums will likely be based on their healthier, younger selves, and will be more affordable than if they applied on their own. Marr says this option depends on the insurance carrier, so ask if it’s available first.
Who doesn’t need life insurance for their child?
At the end of the day, buying insurance is a personal choice. But keep in mind that unexpected funeral costs, as well as lost income from a leave of absence that allows you time to grieve, can be covered for as little as $3 per month.