Did you know that there are a handful of insurance companies that insure children starting at age zero (newborn babies) in Canada?
The reasons and advantages for parents to solve the problem of insuring children with a stand-alone term contract are:
- It’s inexpensive. For example, $250,000 of 20 Year Term for under $220.00 per year for a baby girl
- Locked in rates for term contracts that are guaranteed to be renewable: for example, guaranteed rates for each 20 year renewal period
- You can add additional benefits or riders, such waiver of premiums, on the death or disability of the parent owner
- Insurance coverage to age 80 or 85, the ages at which most 20 year term contracts expire
- The option to change the term coverage to permanent insurance any time (up to the specified maximum age limit) without the need for a medical and regardless of changes to the child’s health, or involvement in hazardous sports, hobbies or occupations.
Buying life insurance for amounts greater than what would be required for last expenses is a futuristic perspective. Additionally parents have the peace of mind that they are not paying for something the child may or may not use in the future, like exercising a guaranteed insurance option rider. Rather the same money is buying immediate insurance protection that includes the option to renew the insurance and/or change it to permanent insurance.
What’s the downside?
As with any term contract, the insurance will expire (lapse) if the payment has not been made during the grace period (usually 30 or 31 days after the payment is due). If there has been a change in the health of the life insured, the contract potentially remains expired/null & void.
If, however, the life insured can prove that they are still a good risk for the insurance company, the contract can be reinstated with payment of all outstanding premiums. If a suicide were to happen, or the insuring company finds evidence of misrepresentation on the reinstatement form (usually within two or three years of the reinstatement), the contract would not pay the death benefit.
Remember one thing though: regardless of the insurance product being bought on children, the amount of insurance being applied for must be reasonable given the parent’s own insurance coverage and their insurable interest in the child.
Cheers, Helena
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Tags: insuring children, term insurance
Helena Smeenk Pritchard
Helena Smeenk Pritchard has over 36 years of experience in the insurance industry and is the Principal of Helena Smeenk Pritchard & Associates, a leader in “Insurance Know-How” training. Helena has had articles published in Advocis’ Forum Magazine as well as Advisor’s Edge, and is a very popular columnist for Advisor.ca.
