Things to Consider When Researching Children’s Whole Life Insurance

If you could do only one thing to help your child or grandchild achieve financial security in their adult lives, would you want them to have:

• ✓ Protection against life’s uncertainties, like job loss or short-term disability,
• ✓ Easy access to cash for big life events like buying a home,
• ✓ No exposure to the ups and downs of the market,
• ✓ Minimal income tax, or
• ✓ Guaranteed life insurance that never expires?

The good news is, you don’t have to choose! You can give them all of this¹ when you invest in whole life insurance through the Grow with Them Plan for children or the All Grown Up Plan for teens and pre-teens.

Because the benefits of whole life insurance get better with time, it’s never too early to meet with an advisor and discover all the ways you can personalize a plan for your loved ones.

What is children’s whole life insurance?

Whole life insurance for kids is a life insurance policy that you purchase and control until the time is right to transfer it to the child. Unlike term life insurance policies, whole life insurance will never expire as long as payments continue to be made.

This means your child or grandchild will be guaranteed coverage regardless of any changes in their health for the rest of their life. Plus, they get a head start on building financial security, thanks to the cash value portion of a whole life insurance policy which has some serious growth potential and they can use that cash at a time when they really need it.

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Common reasons for buying a child whole life insurance

Most parents and grandparents want to help future generations. Whole life insurance for children is a great place to start because the cost is relatively low, the cash investment portion of the policy has a long time to grow, tax-free.

Here are a few of the many reasons why you should start early and put time on your side.

1. Building cash value for future needs

The “cash value” of a whole life insurance policy is like a cash reserve that your child or grandchild can access later in life for things like a down payment on their first home. Plus, certain insurance providers also share some of their profit with policy owners through annual dividends.

2. Securing future insurability

Once you purchase whole life insurance for a child, they are guaranteed coverage for life as long as the payments continue to be made, regardless of any medical conditions that might otherwise make them ineligible for coverage.

3. Coverage for final expenses

No one wants to ponder the tragic loss of a loved one, but the death benefit from a whole life insurance policy can give a family time to grieve without the stress of unexpected costs.

4. Greater flexibility down the road

When your children or grandchildren become adults and start to plan for the future, they will have more options for building wealth because the insurance part of their financial plan will already be established. They can choose to increase coverage or they can put more money toward other goals. Either way, they are going to be grateful that you had the wisdom and forethought to put them on a path to prosperity and security.

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Typical coverage amounts

You can spend as much or as little as you want based on your budget. In Canada, policies ranging from $10,000 to $50,000 are common. Some families will invest more when insurance is part of a strategy to transfer wealth from one generation to the next. As you’ll discover, the process of choosing the right policy includes a high level of personalization. Here’s what to think about as you start to shop for the right solution:

Cost

What can you afford within your current budget? Keep in mind that an early investment in whole life insurance for a child may mean you can worry less about their financial future and put more money into other goals like your retirement or topping up your own life insurance policy.

Additional features and benefits

For an extra cost, you can add policy riders (i.e., coverage that gets added on to an insurance policy to provide additional payouts under specific circumstances) that make your coverage more tailored to your needs. For example, an optional benefit like “guaranteed insurability” provides you with the opportunity to purchase additional life insurance without undergoing a medical evaluation.

Investment component: growth and interest rates

The investment component of a whole life insurance policy is called the cash value, which grows over time. This is money that you can access² later in life if you need it. Your earnings increase over time, based on interest rates, amount of coverage, and the age of the policy. You can learn more in our guide to cash-value life insurance.

Insurance provider’s reputation

Reputations are built over time, and often give a true read on the stability and reliability of an insurance provider. Look for reviews covering topics like customer service and how quickly the company responds to claims. At Serenia Life, we’re proud of our incredible claims history that includes an approval rate that consistently exceeds 99.9%³.

Alternative financial vehicles

Whole life insurance is just one way to set kids up for success. As part of the planning process, we’ll also discuss the role of basic savings accounts and tax-deferred options such as the registered education savings plan (RESP).

To see the planning process in action, get to know Susan & Lemar. She is a working mom with a budget of $100 a month for life insurance for Lemar. She was able to purchase a Serenia Life’s Grow With Them Plan for her six-month-old son. The cost is just $61.38 a month, and payments stop after 20 years (but Lemar is covered for life). In time, Susan can think about incorporating other investments, like a registered education savings plan.

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Potential drawbacks of children’s whole life insurance

Some people don’t see the long-term value of life insurance and prefer alternative ways to help their kids build financial stability. Here’s why skeptics shy away from “outside of the bank” strategies like whole life insurance for children.

Opportunity cost

You can’t invest the same dollar twice, so every time you choose one option, you forfeit another (hence opportunity cost). Comparing whole life insurance to more traditional investments is tricky, and sometimes a combination is the best plan of action. Whatever route you choose, talk to a professional before you rule anything out.

Surrender charges

Indeed, cancelling a whole life insurance policy before it is paid in full will result in fees to the policyholder. For those who feel it is not realistic to commit to payments, alternatives may be more appealing. A good advisor can help you work within your budget.

Limited flexibility

Some people feel that life insurance policies offer limited flexibility because you have no say in how the cash portion gets invested.

Before accepting any of these arguments at face value, pressure test them with an advisor who can show you what real-life results could look like for you and your family.

Should you consider whole life insurance for your child or grandchild?

Once again, if you could do just one thing to put a child on course toward a more financially stable adulthood, whole life insurance checks a lot of boxes. It provides an all-in-one source of guaranteed life insurance, access to a growing cash investment, and the chance to benefit from the profits of a stable insurance company with long-term tax efficiency you can’t beat. It’s also a great gift idea for a child who “has it all.”

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Questions to ask before buying

Once you’re convinced that whole life insurance for kids is one of the best ways for you to share the wealth, here are a few practical questions to ask your advisor to make sure you know what you’re buying and how it works.

Why choose Serenia Life for whole life insurance for kids?

As a financially strong member-based organization whose roots go back nearly 100 years, we encourage kindness by sharing our profits through community outreach, fundraising, and unique member benefits that help Canadians support their families and their communities, including:

• $2,500 post-secondary scholarships
• Up to $600 towards fundraising events, and up to $400 to cover volunteer-related expenses in Canada
• Financial support when you hire a lawyer to draft or update your will
• And more!

View a full list of our member benefits.

Whole life insurance – is it right for you (and them)?

Over the years, you’re bound to find new ways to help your children and grandchildren navigate the world they inherit. Whole life insurance is one of the most reliable foundations you can lay for a tax-efficient, reliable approach to setting your children up for the future. For a quote or more information, set up a no-obligation call with a Serenia Life advisor today.

Disclaimers

¹Dependent on policy selected, rider availability, insurer’s performance, and the client’s financial situation

²Policy loan is an easy way to access the accumulated cash value of the policy. A variable interest is charged on the amount borrowed. This may result in taxable consequences. Loan can be repaid at any time. Upon death and the loan is unpaid, the outstanding balance including any accumulated interest will be deducted from the total death benefit, with the remainder paid tax free to the beneficiary(ies).

³Life insurance claims statistics 2018-2023.