At first blush, considering a life insurance policy on the life of your child may provide for some uneasy feelings. After all, doesn’t my child have a long life ahead of them? Won’t there be time enough for them to purchase life insurance in the future?
The points above may well be true – but the benefits of purchasing a life insurance policy on your child’s life are many and varied.
First and foremost, the underwriting for a life application on a child’s life is much easier, precisely because they have not had a lifetime to accumulate health issues that might otherwise have to be disclosed if they applied for life insurance as an adult.
The relative ease of obtaining coverage provides the peace of mind of knowing that their insurability has been guaranteed. Moreover, purchasing a guaranteed insurability rider at the time of application will allow for additional coverage to be purchased in the future without evidence of insurability.
While both term and permanent insurance coverage may be purchased on a child’s life, there are particular advantages to considering permanent insurance vehicles – such as par insurance - that will build a cash value over time. This cash value builds on a tax free basis.
Given the low cost of the actual life insurance, paying even a modest premium above that basic cost will provide a cash pool that can be accessed at various points of a child’s life, such as for education, purchasing a home, or even retirement.
Such an investment pool can be an effective complement to vehicles such as the Registered Education Savings Plan (RESP) and ultimately the child’s own savings.
Although the insured child is unlikely to appreciate this at the time, permanent insurance on their life can truly be the gift that keeps on giving.
Speak to your Scrivens advisor about the coverage that makes the most sense for your family.