Life Insurance For Children
Do children need life insurance?
No, children do not need life insurance. Life insurance’s primary purpose is to pay off debts and replace income for the dependants we leave behind. Children don’t have dependants; they are dependants.
Then why do people take out policies for their kids or grandkids?
Whole life insurance is taken out on children primarily because it is one of the only vehicles whereby a minor can get tax-efficient investment growth. Minors can hold RESPs but not TFSAs, RRSPs etc. like adults can.
Who should consider whole life insurance for their children?
People who are financially secure with good cash flow. And who have already maxed out their child’s RESPs. The federal government pays a 20% grant up to $2,500 per year for Registered Education Savings Plans (RESPs). No insurance policy is going to get a 20% guaranteed return!
How does it work?
The adult takes out a 20 pay whole life policy on the life of their minor child. The premiums/deposits earn tax-sheltered dividends within the policy. When the child grows up they can access the funds for a down payment, to supplement education etc. For the mechanics of accessing the cash please refer to our accessing cash value tab on our life insurance page.
Which insurers are good for child whole life?
I have policies for my two kids with Equitable Life. Other popular choices are Canada Life, Manulife and Empire Life.
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Who needs life insurance?
Ask yourself this question: Would anyone you care about suffer financially in the event of your premature death? If you have dependant children, the answer is yes. If you have a spouse, the answer is probably.
Who does not need life insurance?
If you are single you probably do not need life insurance. Usually the death of a single/childless person does not leave anyone worse off financially. A single person with a mortgage may still NOT need life insurance as their family would still inherit equity in their property. Single people need to prioritize critical illness and disability insurance.
How much life insurance do I need?
The primary purpose of life insurance is to pay off debts (especially a mortgage) and replace income for dependants of the deceased. We do a needs analysis to determine how much money your family would need to maintain their standard of living in the event of your premature demise. A commonly used guideline for someone in their 30s is 20 times after-tax annual earnings.