Insuring The Kids

Insurance for Your Children

No one wants to go through the death of a child but for the benefit of the child, everyone should consider child insurance. There are two ways to do it; a child rider or a stand-alone policy, both with their own benefits to consider.

Child Term Rider 

Any family that has a child should at the minimum have a Child Rider including each child. It is the cheapest and easiest child insurance, you just add it to a Whole Life or to a Term policy. You can get up to $25,000 (max) per child. Whatever you buy in a rider, it’s each. Typically $10,000 per child is what people get, which typically costs about $3 in premiums total for all the kids per month, each child gets covered for that $3 face amount. Having said that, you do have to provide details of your kids, because not all kids may be covered, since major issue like cerebral palsy is probably not be covered. You will be asked questions like age, height, premature at birth, etc. Every time you have another child you can’t assume they are covered – you must notify the insurance company of the child, with their height, weight, etc. (but it does not change the premium monthly cost for all the children).

The children’s coverage lasts until age 21, maybe to age 25 if they are at home in post-secondary. At age 21 you will be notified by the company that you can exchange/convert the Child Rider with permanent insurance, with no medical where you can get up to 5x what they were initially covered for and that is with no medical guaranteed at the cost of that age (21 years old).

Stand Alone Child Insurance 

There are many benefits of a Stand Alone Child Insurance policy. First of all, later on, it ends up being cheaper, you also get limited pay options which you don’t get on a Child Rider, you can have a policy paid up in 20 years, while the policy increases in value over time which is cheaper when getting the policy when one is younger.

You can get a policy with paid-up additions. When you buy an individual policy for your child, it is a Whole Life policy that creates dividends. Dividends are a profit the insurance company makes and then you get a profit which you can purchase more insurance with. Later in life, the child can take that insurance and borrow from their built-up cash values for whatever their needs are, retirement, or a down payment on a home, etc.

So the advantage of going with a stand alone policy is that it’s cheaper, has limited pay options, dividends, can buy more insurance, there is no maximum coverage with this type of policy. Plus you can add a guaranteed insurability benefit rider to your stand alone policy – which means starting at age 21 they will be offered to buy 10 times the face amount with no medical assessments. The offers happen every 3 years, there is an offer of 10,000 and then also included in the 10 is on your first Marriage and your first house (which you have to apply for). Every 3 years is  24, 27, 31, 37, 40, 43. And you will get one more (it’s 10 times). You don’t have to take the offer. If you don’t take the offer it will expire, and you can take the next one (or not).

Cash-Values are investments

Buying insurance for your children can give them a financial leg up in their future. As the policy grows and your premiums get paid year after year a cash-values portion gets built-up that your kids can borrow from, tax-free, and guaranteed. One can borrow up to 80% of the cash-values and does not have to pay back the full amount, they can choose just to pay the interest. If you don’t pay back the full amount it just comes out of what the death benefit would be. Your child can choose to use that money towards a down-payment on a home, towards a car, or maybe towards a business venture.

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