Life Insurance for Infants: Parents’ Guide

Thinking about infant life insurance for your little one in Canada, but aren’t sure if it’s a necessary step? We'll cut through the confusion, talk about what it means for your family, and help you figure out if it's something worth considering or if there are other options.

• Cost-Effective Premiums: Coverage for a set period, usually until the child reaches a certain age, often at an affordable rate.
• Cash Value: Some infant life insurance policies, such as permanent ones, provide lifelong coverage and accrue cash value over time, albeit with higher premiums.
• Guaranteed Insurability: Securing life insurance for an infant ensures coverage in the future, regardless of any health conditions they may develop.

• Slow Cash Value Growth: The savings component takes time to build, and administrative fees can reduce the cash value over time.
• Limited Financial Risk: Infants don’t have dependents or financial obligations, reducing the necessity for life insurance compared to adults.‍
• Opportunity Cost: Premiums paid for infant life insurance could potentially be utilized for other financial priorities like retirement savings, debt repayment, or investments with potentially higher returns.

If the reason for buying the policy is financial security for your baby, there are alternative methods to consider. A good example is investing in education savings plans (RESPs) or contributing to savings and investment accounts, both can offer greater flexibility and potential returns.

Life insurance policies for babies work the same way as adult policies in Canada. They can come in various forms, each with its unique features. 

When it comes to infant life insurance, there are three common policy types to consider: 

1. Term life insurance: offers coverage for a set period, typically until the child reaches a certain age and is a cost-effective choice
2. Whole life insurance: a type of permanent life insurance policy that offers lifelong coverage, includes a cash value component that grows over time, and has a high premium 
3. Child rider: an add-on for a life insurance policy that provides coverage until your children are of a certain age. This is often the cheapest way to get coverage for your child.

As we’ve explored, infant life insurance can be beneficial, but in the majority of cases, a life insurance policy for your infant is not necessary. While infant life insurance is an option, there are many alternatives that might better suit you and your child, including;

• Getting your own life insurance policy
• Paying down your debts
• Set up an RESP (registered education savings plans)

Deciding to buy your baby a life insurance policy is a big step. You can either buy a separate policy for them or add a rider to your own insurance. Applying for an infant's policy is usually straightforward and doesn't involve a medical exam, regardless of the type you choose.

Selecting the right life insurance company is important. Some insurance companies offer whole life policies for children, offering lifetime coverage as long as premiums are made.

Others might offer standalone policies for infants or a rider that pays out if the infant passes away before the parent, with the option to convert to a permanent policy later on. Remember to do your research and look out for internal fees, not just the upfront cost, when selecting a life insurance policy for your child.

Applying for a child life insurance policy is quite straightforward. The application will likely need the infants:

• full name
• date of birth
• Social Security number

Take note: The application may include a few health-related questions for assessing the child’s health status.

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