Life Insurance for Children: To Buy or Not to Buy? (Parent Guide)

Key Takeaways

• Children’s life insurance is available as both term and whole life policies or as a rider on your own existing policy
• Most families should consider contributing to registered savings accounts over getting children’s life insurance policies
• In a few cases, children’s life insurance policies can help to lock in coverage for individuals who may have issues being approved later in life

This page provides general information about life insurance for kids. Take note that PolicyMe does not offer life insurance for children, but our policies come with a free $10,000 coverage for each of your children. All information provided here is for educational purposes only and should not be considered financial or legal advice.

Life insurance for children: how does it work?

Life insurance for children in Canada works the same as it does for adults. You put a life insurance policy in place and, if that person passes away, the beneficiaries get a death benefit in a lump sum.

The distinction lies in the fact that with child life insurance, the policyholder is the minor themselves, rather than their parents.

There are 3 common options for life insurance for children:

• Term life insurance: your child is covered for a set term and then it expires
• Whole life insurance: your child has coverage for their entire life
• A child rider added to the adult's existing policy

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Parents will usually get life insurance for their children to:

• Cover final expenses with a small payout
• Lock in a rate on a whole life policy, setting them up for insurability later in life
• Using the investment vehicle on a whole life policy to maximize the payout

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While life insurance is usually a good idea for many Canadians, policies for your kids likely aren’t the best way to build financial security for your family or dependents.

The first step to securing your child’s financial future is getting your own life insurance policy.

“Protecting your child financially starts with getting coverage for yourself as a parent. You have to put on your oxygen mask first before you put on someone else’s.”

^{— Stephanie Roux, Life Insurance Advisor}

See how affordable a term policy can be for parents. Get My Quote

* Every PolicyMe policy comes with $10,000 of free life insurance for each of your kids.

Pros and cons of children’s life insurance

Because term and whole life insurance for kids functions the same way as those for parents, there are virtually the same benefits and drawbacks as adult policies.

Take note

The main con of children’s life insurance is that it does not fulfill the primary function of supporting your financial dependents.

Here are some pros & cons of life insurance for children in Canada:

Pros of children's life insurance:

Doubling as a savings plan. Whole life policies offer lifelong coverage and include a savings component.

The investment grows with interest and can be used for anything, from tuition fees to a down payment on a house. Many parents see it as a savings fund and investment option.

Children’s life insurance is cheap. When you get a life insurance policy as a child, you lock in a low rate that stays the same throughout the term.

And because life insurance policies for children are relatively cheap, you pay lower premiums overall.

It can guarantee future coverage. This is especially beneficial if your family has a history of health conditions that your child is likely to inherit.

Getting a life insurance policy early will ensure that they can keep their coverage, without the risk of being denied later in life.

It can serve as an emergency fund. You are the “beneficiary” of the child’s life insurance.

And as such, you can use that death benefit to cover medical and funeral expenses, counseling and replacing income if you need to take time off from work.

Cons of children's life insurance:

Those savings take a long time to add up. While the savings component takes time to grow, watch out for pesky admin fees (and premiums) that can eat into the cash value.

And tapping into the savings will cost you in the form of taxes, plus a smaller death benefit. If saving is the goal, consider a traditional investment account or a savings plan for better returns.

Life insurance is intended for those with financial dependents. Life insurance is a financial safety net designed for people with dependents. This reason is enough of a con to encourage parents to look at alternative savings methods.

Your focus as a parent should be on securing your family’s financial future if something happens to you.

The payouts are limited. The coverage amounts are limited and your child may need to purchase more life insurance as an adult to fully protect themselves and their loved ones.

Securing a low rate can be smart, but they may not have trouble getting a good rate later as a healthy young adult. You save years of premiums and they get covered when it matters most.

They only cover one type of emergency. Life insurance only pays out if the policyholder passes.

Fortunately, the odds of that happening to your child are slim. Instead of paying into a policy that may never come in handy, consider building up an emergency fund that can help you weather life's storms.

Should I buy life insurance for my child in Canada?

In most cases, a life insurance policy for your child is not necessary. There are many other ways that you can provide financial stability to your family, including:

• Adult life insurance policies
• Savings and investment accounts
• Paying down debts

If, however, you want to get life insurance for children, there are times when it might make sense:

If all of your other financial priorities are taken care of for your family, then life insurance for your kids might be a worthwhile investment.

• This includes building up that emergency fund, savings for retirement and other things like tuition.
• Ensure that you've paid off your high-interest debt or mortgage.
• You should also make sure that you have adequate life insurance coverage on yourself first to protect them if you were to pass away.

Did you know?

Your life insurance coverage at work is probably not enough on its own.

These policies generally only payout 1-2x your annual salary. Whereas the average Canadian with separate life insurance has 3.5x more coverage than someone with just life insurance from work.

If you haven’t secured all of the financial safety nets listed above, then it’s probably a better idea to focus your investment there, instead of in a children’s life insurance policy.

Not sure how much life insurance you need? We’ve got you covered:

Find out how much coverage you need in a few clicks. Calculate My Needs

The second scenario where life insurance for children might make sense? If your child or your family has a history of a medical condition that could affect their ability to get life insurance as an adult.

In these cases, getting your child a whole life insurance policy could guarantee coverage when they reach adulthood.

Still keen to purchase life insurance for your child? Consider adding a child rider to your own life insurance policy. These are add-ons that you can attach to your existing policy for a fee on top of your premiums.

Once your kids become adults, coverage with the rider ends and they have the option to convert it into an individual plan. This is usually cheaper than buying a life insurance policy outright.

They can also get guaranteed life insurance Canada to get the coverage they need if your family has a past with illness.

When can I buy life insurance for my child?

You can buy life insurance for your child in Canada at any time. Many life insurance policies allow you to begin a policy as young as 15 days old up until age 17.

Many whole life insurance policies for kids have an investment component. So purchasing the whole life early will maximize the cash value later in life. This, of course, comes with the trade off of high premiums for whole life insurance policies.

Take note

There are circumstances where getting life insurance this young makes sense, but it’s not for everyone. The infant mortality rate in Canada is 0.044 per cent, making the need for life insurance on a small child very unlikely.

What's the youngest age you can get life insurance?

The youngest age to get life insurance in Canada is shortly after the child is born—typically after just 15 to 60 days, but it depends on the health of the child and the type of policy.

Most insurers will allow you to purchase a child life insurance policy at any time until your dependent is the age of 18.

“If you have a rider – you don’t even need to advise the company when they’re born, they’re automatically covered.

It’s actually more important to remember to cancel it once the children are adults, because the life insurance company will assume that you have kids until told otherwise.”

^{— Stephanie Roux, Life Insurance Advisor}

Types of children’s life insurance policies

Child life insurance—like the adult version—comes in a variety of types. The three most common types of children’s life insurance policies include:

• Whole life insurance for children
• Term life insurance for children
• Child rider on an adult policy

Whole life insurance for children

Whole life insurance policies for children is the most expensive and comprehensive coverage on the market.

This type of dependent life insurance pays out upon the death of the policyholder, regardless of their age. As the name suggests, it provides coverage for the policyholder’s whole life.

Whole life coverage is suitable for high-income families who have maxed out their contributions to TFSAs and RRSPs and are looking for another investment vehicle.

Because whole life insurance locks in the premium payment at the time of policy signing it’s also suitable for children or families with existing medical conditions that may prevent them from getting coverage later in life.

Term life insurance for children

Term life insurance policies for children provides coverage for a pre-defined period of time—typically 10, 20 or 30 years. These policies can be purchased and renewed as needed until the dependent turns 18. Then they’re able to purchase their own adult term policy.

Premiums for term policies are much cheaper than whole life insurance. And their payouts are more significant than child riders. So it can be a happy medium for parents.

But remember that the primary beneficiary of these policies are not your children, but you as the policyholder.

“This is a rarer offering from life insurance companies. But the use case for these policies are pretty similar to a child rider.”

^{— Stephanie Roux, Life Insurance Advisor}

Child riders

Child riders are the ideal solution for parents that already have life insurance policies or who want to get coverage after the birth of a child.

Child riders are tacked onto your monthly life insurance premiums and provide coverage until your children are of a certain age. This is usually the cheapest way to get coverage for your child.

And covers most immediate expenses if something unthinkable were to happen. The policy pays out a set amount of money; usually between $5,000 and $30,000.

All term life insurance policies through PolicyMe come with $10,000 of free life insurance coverage for each of your children.

Here’s how $10,000 in child coverage compares with other top life insurance companies:

• PolicyMe Free Child Coverage: $0
• RBC Children’s Term Rider: +$5.40 per month
• Canada Life My Term T20-Child Rider: +$5.40 per month
• Sun Life Sun Term Child Benefit: +$4.95 per month
• BMO Term Life Insurance T20-Child Rider: +$6.24 per month
• Manulife Early Start Child Term Life: +$6.64 per month

How much life insurance can a child get?

The amount of life insurance coverage a child can get depends on the type of policy you choose, and the amount of coverage you purchase.

• Term and whole life insurance policies vary depending on the insurance provider
• Child riders usually provide coverage in increments of $5,000 or $30,000

No parent wants to entertain the thought of something happening to their child. But it's important to decide on the amount of coverage your family might need in that situation.

This will help to ensure that you buy the right coverage at the right price.

“Think about whether you’re doing this to protect yourself or your kid…. And that will inform the type of coverage and amount of coverage you get.”

^{— Stephanie Roux, Life Insurance Advisor}

Alternatives to kid’s life insurance: preparing for their financial future

The first course of action is rarely getting life insurance policies on your kids when preparing for their financial future. But in some scenarios, life insurance on a child has its merits.

That said, there are many alternatives to children’s life insurance policies that are better financial moves for you and your dependents.

1. Set up a traditional savings (and investment) account

Opening a high-interest savings account on behalf of your child is one way to secure their financial future.

“I'd much rather establish a long-term, easy savings plan that's accessible and does not cost too much money as a parent of grown children.”

^{— Lorna Eastman, CFP and President of Lorna Eastman Financial}

Not only will it yield greater returns, but it's also easy to set up and access. You can contribute as much as you want, as often as you want to this account.

You can also deposit monetary gifts they get from family and friends. When your child is older, they can use the account to buy their own life insurance policy—with some extra to spare.

2. Take advantage of government grants to save for your child's education

For parents in Canada, the Registered Education Savings Plan (RESP) lets you save and invest money for your child's post-secondary education.

In an RESP, investments grow tax-free. Your child will only be taxed for the income they receive from the RESP once they're in university, and since the income bracket of students is low, so is the tax on RESP payments.

The federal government also adds 20% of your contribution to your child's RESP with the Canadian Education Savings Grant (CESG). You can get up to $7,200 in total CESG.

And there's the Canada Learning Bond (CLB), which the government contributes to the RESP of children from low-income families.

The best part about an RESP is that even small contributions make a big difference over time.

“Once you have that awareness and ability [to make contributions], it's not hard. It can really help a lot, more than you expect.”

^{— Lorna Eastman, CFP and President of Lorna Eastman Financial}

Benefits are available at the provincial level depending on where you're located within Canada, for example:

• In British Columbia, there's the B.C. Training and Education Savings Grant (BCTESG), which the provincial government deposits into the B.C. child's RESP account.
• In Ontario, there's the Ontario Student Assistance Program (OSAP), which provides financial aid for college or university.

3. Secure your own policy before buying children’s life insurance

Securing your own life insurance policy is one of the best ways to protect your children's financial future.

As a parent, you want to know your children are taken care of in case something happens to you. This is why it's more important for you and your partner to have life insurance policies. Having coverage for yourself is one of the best ways to protect your children's financial future and provide financial security.

Not only will this cover medical bills and funeral expenses in case of your death, but it also ensures your children's daycare services, education, and other expenses are paid after you're gone.

With your own life insurance policy, you can add on term riders that cover all of your children until they're adults. This is easier to get and much cheaper than a life insurance policy for a child.

“The priority is to have the parent(s) insured, making sure their income is secured. And then an extra layer of protection would be a child rider, and then an extracurricular gift would be a whole life policy if the budget allows.”

^{— Stephanie Roux, Life Insurance Advisor}

4. Create emergency and rainy day funds

Build up emergency and rainy day funds for unexpected expenses, like last-minute replacements for school-related technology.

These funds give you greater control and yield greater returns when stored in a high-interest savings account.

Should money get tight in the future, you won’t get charged for cash withdrawals that reduce your benefits (like with life insurance for kids).

Next steps: should you buy children’s life insurance?

1. Take stock of your financial situation and what your family might need if something were to happen to you or your kids.
2. Most often, the best option is an adult term life insurance policy, where you can add on a child rider.
3. If you or your kids have conditions that put them at risk of being denied coverage later in life, consider a children’s life insurance policy.
4. Shop around and get quotes for a child rider or life insurance policy from a variety of companies.
5. Apply for the policy or rider that makes the most sense for your situation.

FAQ: life insurance for children

Yes, you can buy a life insurance policy for your adult child. But you will need to take a few steps to enroll in a life insurance policy for your adult child; this includes:

• Getting your child's consent
• Having your child sign the life insurance policy application
• Having your child answer health-related questions

As a parent, your responsibility to your children extends beyond their childhood. It persists into their adulthood, ensuring their financial security as they navigate life's complexities. This responsibility may involve purchasing life insurance to provide tax-free financial protection for them, securing adequate coverage to safeguard against life's uncertainties.

Use insurance calculator Canada to get the best rates for children.

Do children require medical exams for life insurance?

The majority of life insurance companies will not require a child to do a medical exam when you apply for a policy. You simply complete the application and answer a few questions about their existing and family medical history.

This can be helpful in the future too, as when they become adults and choose to transfer a children's life insurance policy to an adult policy, they may be able to get approval without a medical exam.

But there may be exceptions to this depending on the life insurance company policy.

Is life insurance for kids worth the cost?

In general, no, a children's life insurance policy is not worth the cost. You can do many other more important things for your family with the planned monthly premium payments, such as start an emergency fund, save for retirement, save for college, and more. Family life insurance is important, but it's most important to get the parents covered first.

There are exceptions, though. For example, a children's life insurance plan may be worth it if your family has health issues that are likely to pass to your child. Not only do you have coverage if your child passes away due to this condition, but it also guarantees their coverage as an adult by converting the policy.

You may also benefit from getting critical illness Canada or combined life insurance.

Get insurance quote online in the comfort of your own home through PolicyMe.

You need facts, not fluff. Our goal is to provide you with honest, trustworthy information to help you make informed decisions. While our content is created with insurance experts, it is for educational purposes only and should not be considered definitive professional financial advice.

We recommend seeking the counsel of a licensed financial advisor before making any decisions regarding insurance or personal finance.

The prices listed in this article have researched and fact-checked with both internal and external sources. Prices are based on publicly available rates as of March 2023.

Our sources:

Canada, E. a. S. D. (2022, June 14). Registered Education Savings Plans. Canada.ca. https://www.canada.ca/en/services/benefits/education/education-savings/resp.html

Canada Revenue Agency. (2022, November 10). Canada Education Savings Grant (CESG). Canada.ca. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps/canada-education-savings-programs-cesp/canada-education-savings-grant-cesg.html

Government of Canada, Statistics Canada. (2022, January 24). Mortality rates, by age group. https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1310071001

Ministry of Education and Child Care. (2022, November 30). British Columbia Training & Education Savings Grant Information - Province of British Columbia. https://www2.gov.bc.ca/gov/content/education-training/k-12/support/scholarships/bc-training-and-education-savings-grant

OSAP: Ontario Student Assistance Program. (n.d.). ontario.ca. https://www.ontario.ca/page/osap-ontario-student-assistance-program

WinQuote®. (n.d.). https://www.winquote.net/