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Why buy life insurance for a child?

There are many reasons a parent or grandparent should purchase a life insurance policy for a child…and some of the reasons may surprise them. Life insurance for children:

  1. Provides permanent insurance at children’s rates. Premium payment options of 10 or 20 years are available.
  2. Creates a stable investment option with tax-advantaged growth and cash value that can be accessed to help fund future life events.
  3. When the child reaches the age of majority, ownership of the policy can be transferred tax-free giving them their own life insurance policy they can use to meet their financial planning needs.

When it comes to providing for your children and creating generational family wealth, these 3 points are huge. Let's walk through them. 

First and foremost, when you buy a child's whole life insurance policy, you have insured them for life. It does not matter if they have health issues in their teens, 20's, or 50's, or even 80's, they are covered. This means no matter what happens in their life, their finances will be built the strong foundation of life insurance, which replaces their income if they pass away. In the sad case they pass away young, you receive the benefit, but in the more likely case they pass away when they are old, their children or other loved ones will receive the benefit. So, with a small monthly contribution when your children are young, you are leaving a financial legacy to your grandkids or other loved ones. 

Secondly, a properly structured permanent insurance policy creates a stable tax-free investment. This means that within a life insurance policy, your children are building wealth from a young age and the money can be used for anything from university to starting a business, to a down-payment on a house, and even retirement income (think about how much they could have, allowing their money to grow for nearly 65 years). It's for this reason I've purchased life insurance policies for our children as an alternative to the RESP because RESPs are only good for school-related costs. In contrast, my kids can use the savings from a life insurance policy for anything. 

Finally, Number 3 is important because you can transfer the ownership of the policy over to your children when they turn 18 or anytime after that, giving them control of the policy, the ability to choose what they do with their savings, and the choice of their own beneficiaries. There are no penalties, no fees, and no stipulations It's a free gift to your kids that will benefit them and their children. I'm thrilled that when I believe my kids are ready, I can just give them the policy and allow them to continue what I've already started for them.

Find out more about Fresh Ground Financial and how they can help with your finances, today!