Why buy life insurance for children?
Life insurance is a worthwhile purchase because, even if you're still alive, it's not always something you need at a particular stage of life. With property insurance—for example, car, home, condominium, etc.—you should only buy insurance as long as you own one of those assets. Life insurance is only necessary at certain stages of life, and even then, it depends on who you are, your needs, the needs of your dependents, your budget, and so on. So, what about children? Why do some people buy life insurance for their children, and what are the benefits?
There are advantages and benefits to buying life insurance for people under 18. Yes, life insurance can provide a safety net for your loved ones, but how does it work with children? Well, it's all about protecting your children's insurability. Here's what that means and why you should consider it.
Because life insurance protects you and your children
Like life insurance for an adult, a life insurance policy purchased for a minor is a contract between the insured and the insurance company. As with any policy, you will pay premiums (monthly or annually) to ensure the policy remains in effect and that, if the insured dies during the policy term, a death benefit is paid.
However, in the case of a person under 18, who receives the payment if the insured dies? It's a somewhat morbid topic, but it's important to be aware of it. If the insured dies during the policy's validity period, the policyholder—that is, the legal guardian, parent, or grandparent—can be designated as the "beneficiary," meaning the one who receives the policy payout.
The only life insurance policies available for children are generally whole life policies, which offer coverage for life as long as the premiums continue to be paid. The advantage of purchasing life insurance for a child is that the premiums are guaranteed and are unlikely to increase over time. Furthermore, with a whole life policy, a base amount of the premium is used to accumulate the cash surrender value, which can then be accessed while the insured is alive for any reason.
Term life insurance policies cannot be purchased for children. However, you can purchase a term life insurance policy and add an endorsement that would cover all your children/dependents until they reach a certain age, at which point you can choose to convert their coverage to a permanent alternative.
How is buying life insurance for children different from buying life insurance for adults?
Buying life insurance for a child is just as easy as buying life insurance for an adult – and you can do it quickly through a broker like Panda7! – if not easier, since children won't have to undergo the standard life insurance medical exam. You'll still need to fill out an application, but this significantly streamlines the process. You can take out a life insurance policy for a child aged 17 or younger (although the age limits may be lower for some insurance companies, such as 14 or 16).
As the policyholder of your child or dependent, you can choose to transfer ownership to your child at any time. Typically, policies are transferred from parents to children once they reach adulthood and are able to pay the premiums.
So, what is the biggest advantage of insuring a child? Premiums are much cheaper the younger the insured is when the policy is purchased. This is especially advantageous for more expensive policies—i.e., whole life or universal life insurance policies, where you can lock in the capital at the time of purchase and the premiums are guaranteed for the life of the policy.
You can also choose the coverage amount that best suits your situation. The amount you pay will be directly affected by the coverage amount you purchase. An insurer may also offer to pay off a policy over a certain number of years rather than over the child's lifetime. Some insurance companies offer 10- or 20-year payment options for children's whole life insurance policies. While a shorter payment period will result in a higher premium, you might consider this option if you want to transfer a policy that has already been paid off to your child.
Buy life insurance for your child with Panda7
Buying life insurance is a big decision, which is why Panda7's friendly and experienced brokers are here to help and shop around for the best life insurance policy for you. We get you quotes, compare policies, compare options, and serve as your #1 resource for finding insurance rates that work for you. With Panda7, you can save time, save money, and get immediate coverage for your child, if that's what you choose. We're also confident we can discuss the benefits of buying life insurance for a child with you individually, and whether it's the best fit for your budget and current situation.
Our online resources are available 24/7, giving you immediate access to the lowest quotes from Quebec's top-rated life insurance companies. We save you time and hassle, ultimately giving you the peace of mind you and your family deserve.