Why Secure an Insurance Policy for Your Child or Grandchild? | Cowan

Insurance policies are typically viewed as a safeguard against the loss of income due to illness or death; however, the perspective shifts when it comes to children who do not have an income to protect. And the financial impact of a child’s illness or loss can be profound on a family.  

Often overlooked, Child Insurance can not only act as a safeguard against heart-wrenching situations but can also be a robust financial instrument ensuring future insurability for the child by securing their financial stability in the long run. This dual role of Child Insurance makes it a compelling consideration for families.

Some advantages to purchasing insurance for your child or grandchild include:

• Future insurability. By purchasing insurance for a child, you effectively lock in a lower premium rate and future insurability than if they were to buy an insurance policy for themselves as an adult.  
• Protecting against expenses in the event of death with life insurance. A life insurance policy on a child will cover final expenses, as well as provide some funds that would allow you to take some time away from work and grieve your loss. It takes some of the financial hardship out of a very difficult situation.
• Future financial security. Permanent life insurance includes features that help grow money within your policy over time (cash value) in a tax-deferred manner. The policy can later be transferred to the child tax-free. This type of policy will provide coverage for the child for life. When they are older, they can use the cash value to help pay for major expenses like tuition, a car, or a home.
• Protecting against the expenses of an illness with critical illness insurance. This coverage, paid in a lump sum, helps you compensate for lost income if you require time from work to care for a child. Money can also be used to pay for additional expenses, including treatments, prescription drugs not covered by a provincial healthcare plan, and travel expenses. This allows you to focus 100% on the child’s recovery if they fall seriously ill without worrying about finances.

What types of policies are available for my child/grandchild?

• Child riders. This coverage is applied to an existing policy insuring the parent/grandparent. One of the cheapest forms of insurance for a child, this type of policy ensures the child has coverage to the age of 21-25 years. Upon expiry, the child can convert the coverage to a stand-alone policy with death benefits specified by the insurance carrier.
• Stand-alone policy. The parent/grandparent can purchase a policy in the child’s name. The policy can be in the form of Term Life Insurance, Permanent Life Insurance or Critical Illness Insurance. The parent/grandparent would continue paying the premiums until the child takes over the policy ownership or for fixed numbers as per the coverage structure.

When can I buy insurance policies for my child/grandchild?

Insurance coverage can be purchased for a child between the ages of 15 days old to18 years. When looking at permanent insurance, the younger the child’s age when the policy is issued, the more time is available to maximize the cash value that grows within the policy for the child to use later in life.

How do I purchase an insurance policy for my child/grandchild?

Once we have discussed the options available and found the best product and coverage amount for your family, you will have to share certain information with an insurance provider through an application process. This is completed with your advisor, and all information shared is confidential between you, the advisor, and the insurance carrier. For minor children, the parent/grandparent would be listed as the policy owner payor and have the power to designate beneficiaries accordingly. Once the minor child is old enough, age 18 or 21, the ownership can be changed to the child tax-free. After this, the child will continue to pay the premiums and can designate beneficiaries as they see fit.

How much does an insurance policy cost for a child?

Prices vary between insurance carriers and depend on the policy type and coverage amount. Typically, permanent insurance policies cost more because of the cash value component. In contrast, term insurance and child riders are cheaper options. Working with your advisor to review these options would be the best way to determine a product that suits your needs and budget.

What’s Next?

Contact us to book a meeting and learn more about how you can insure your child’s future.

Laura Van Brunt
Licensed Insurance Coordinator
Cowan Financial Solutions
T: 226-318-1114 
laura.vanbrunt@cowangroup.ca

Matthew Loker
Associate Advisor 
Cowan Financial Solutions
T: 226-989-3619
matthew.loker@cowangroup.ca