How life insurance for children in Canada works

Do children need life insurance?

No one wants to talk about getting life insurance for children, as it means considering the unthinkable. Heck, parents are busy enough trying to get their child to sleep or stop crying, so they may not even consider it. 

That said, there are two primary reasons why you should consider getting life insurance for your child.

The most optimistic reason for buying coverage during childhood is for the ability to “convert” the child’s policy when they come of age – typically between ages 21 and 25. When the child converts their policy, they can get regular life insurance coverage without having to answer a questionnaire or undergo a medical exam (i.e. no medical life insurance). This strategy ensures they can get life insurance coverage even if they develop a medical condition during childhood that would normally prevent them from getting coverage as an adult.

The less optimistic reason for buying child life insurance is to cover the very real costs associated with losing a child. Families who lose a child will incur funeral costs, may need to take unpaid time off work, and will likely want to invest in counselling. While a life insurance benefit can’t make up for the loss, it can help facilitate the grieving process.

Best children's life insurance coverage options

There’s more than one way to get life insurance for children, and some require nothing more than a phone call to your current provider. Here are the main options:

• Child Term Riders (CTR): If you already have your own life insurance, one of the cheapest ways to get insurance for your children is with a CTR. These riders typically offer guaranteed insurability up to a certain age, usually 21-25. This is the age at which your baby-turned-college-grad can purchase their own life insurance policy without supplying a medical.
• Stand Alone Term Renewable Coverage: This is a child’s own insurance policy which can be renewed at predetermined intervals without supplying additional medical evidence. Before these policies expire, you can convert them to permanent or whole life policies. 
• Insurance for life (Whole life or Universal life): This is the most expensive solution with the most comprehensive coverage. It pays out regardless of when the insured passes away, but the premiums are much higher. There is an investment option available sometimes, but don’t consider it over a TFSA or RRSP for investing. Unless you’re a very high net worth individual, whole life or universal life insurance for children is probably not the right option.

The price of any policy depends more on the type of coverage and less on the insurance company used. However, you should compare life insurance quotes to see what different insurance providers cover under their policies. Actual coverage can vary significantly from one provider to another for plans that appear to have a similar price.

What does life insurance for children cover?

Children’s life insurance policies can be purchased by the child’s parent, grandparent or legal guardian, and typically payout a defined benefit if the child dies while the policy is in force.

Most child life insurance policies exclude certain causes of death. If the child has a pre-existing condition at the time of application, your claim will be denied if it contributes to their death. Depending on the insurer, health problems that arise shortly after birth may count as pre-existing conditions, even if you had already purchased a policy.

A child’s life insurance policy may not pay out in the case of accidental death where the accident could reasonably have been prevented. For example, a benefit may not be paid following the death of a child in a car accident during which they weren’t properly restrained.

Sadly, most insurance policies do not cover death by suicide despite it being the leading cause of death among youth and young adults.

 

Where to get life insurance for children

Here are a few of the children’s life insurance policies offered by the larger life insurance companies in Canada:

• Manulife child life insurance policies start at $4.17 per month for $5,000 in coverage. Children can be enrolled without a medical exam or questions between the ages of 60 days and 12 years, and coverage can continue until the child reaches age 26. If you have or need life insurance for yourself, Manulife’s Family Term Life Insurance product offers a CTR for $3 per month for $10,000 of coverage that requires a small questionnaire when you apply.
• Canada Life offers a CTR for $5 per month per $10,000 of coverage. Children can be enrolled between the ages of 15 days and 17 years. Coverage can extend until the child’s 25th birthday, at which time the policy can optionally be converted to a new term or permanent life insurance policy.
• Foresters also offers the ability to add a CTR for $5 per month per $10,000 in coverage. The child can be added 15 days after their birth up until the time they turn 18, and coverage can continue until the time they reach age 25. Coverage can be converted to a new policy at up to five times the value between the child’s 21st and 25th birthdays. 

It’s always best to get all the details and compare the pricing, plans, and available options before purchasing a policy.

When can you get life insurance for children?

Assuming a healthy birth, you can get life insurance for your child shortly after they’re born – typically after 15 to 60 days. Older children may qualify for life insurance as well; most insurers will allow you to get a children’s life insurance policy until the time they turn 18.

To qualify for life insurance for your child, you may have to answer some questions about the child’s medical history, as well as your own. As with most term life insurance policies, pre-existing conditions won’t exclude them from coverage but will prevent a benefit from being paid if it contributes to the cause of death.

Note that most children’s life insurance policies have a 24-month waiting period before benefits may be paid. That means if the child dies within two years of purchasing the policy, the payout will be limited to the amount of premiums paid.

Know that insurers cannot ask if you’ve previously undergone genetic testing for your child. However, if one of your family members has an inheritable condition, the insurer can deny coverage for the child.

The Bottom Line

So, is life insurance for children necessary? It’s a decision you’ll have to make for yourself, but it’s generally a cheap and worthwhile addition to your own life insurance policy, through a Child Term Rider. If you don’t have your own life insurance policy, the birth of a child is the right time to consider it. Life insurance will make sure your child is provided for in case something happens to you. Get multiple life insurance quotes to find the policy that’s right for you.

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