Newborn Baby Life Insurance In Canada

Newborn Baby Life Insurance In Canada

Written by Lisa Rennie
Fact-checked by Caitlin Wood
Last Updated June 27, 2022

There are so many things to think about getting for your baby, but should life insurance be one of them?

Generally, people buy a life insurance policy for themselves, most have never thought about setting their baby up with their own policy. But there are a few good reasons why a life insurance policy might be something to buy for your child, despite their young age. 

Let’s dig deeper into life insurance for babies to help you decide if your baby needs it.

Do Newborn Babies Need Life Insurance? 

It’s not something that parents want to think about, but a life insurance policy for babies might make sense, especially from a financial standpoint. 

Adults who shop around for a life insurance policy for themselves may have noticed that policies tend to be more expensive with age. The older a person is, the closer they are to end-of-life. This increases the risk of the insurer, who will pass on these risks to you; the policyholders, in the form of higher premiums. 

Buying a life insurance policy for your baby is much more affordable than a traditional policy for an adult. In fact, you may be able to get a term policy for less than $5 a month. 

Having a policy in place for your baby can help cover any expenses if the unspeakable should occur. You may also be able to buy it as an add-on to your own life insurance policy.

Rather than having to worry about things like paying for a funeral and other related expenses, your new newborn life insurance policy lets you spend your time grieving along with your family instead. 

What Type of Life Insurance Can You Get For Newborn Babies In Canada?

Like conventional life insurance policies for adults, policies for babies come in two main forms: term life insurance or permanent life insurance.

Term Life Insurance For Newborns

A term life insurance policy is designed to provide coverage for a certain number of years and expire at the end of the term. This is a more affordable option, though the benefit payout is lower compared to a permanent life insurance policy. If you have a life insurance policy for yourself, ask your insurance provider if you can add a child term rider to your policy. 

Also, find out if the policy is convertible when your child reaches adulthood. This can be much more affordable than taking out a brand new policy when your child is an adult. 

Permanent Life Insurance 

A permanent life insurance policy provides coverage for your child’s entire life and won’t expire, as long as the premiums are paid on a timely basis. This type of policy is more expensive than a term life policy, but the benefit payout is usually higher and there’s a cash value benefit as well. 

Some permanent life policies also offer the option to buy a participating policy, which collects dividends from the investment portion. 

What Is Cash Value Insurance? 

With a permanent life insurance policy, you have the option to borrow against the policy and have access to a cash value benefit. For every contribution you make toward your policy, a certain amount is put towards the cash value account, which accrues interest over time. 

This cash value benefit is one of the reasons why a permanent policy is more expensive than a term policy. 

When your child becomes an adult, the policy ownership will be transferred to their name. At that point, they’re free to borrow against the policy or withdraw the funds from the cash value account. These funds can then be put towards college tuition, a down payment on a home, and other major expenses. 

Benefits Of Purchasing Life Insurance For Your Newborn Baby

There are a few good reasons why you may want to consider buying a life insurance policy for your baby:

Coverage Is Cheaper At A Younger Age

As mentioned earlier, a life insurance policy is usually less expensive when it is purchased at a younger age. The older you get, the more expensive your policy would likely be, with other factors accounted for. But for newborns, life insurance policies are much more affordable.

More Time To Grow The Cash Value Portion

With a longer window of time, the cash value portion of the policy has more time to grow. Not only will there be more time to make contributions, but there will be more time to allow this account to accrue interest. 

Support Your Baby’s Future Plans

There are several things that your child can do with their policy when they get older, particularly if you purchase a permanent policy that comes with a cash value account. 

Not only will the policy protect their family in the event that their life is cut short, but it can provide them with an investment that they can tap into to cover the cost of education, a home or a vehicle purchase. 

When Should You Buy Life Insurance For Your Newborn Baby? 

If you’re thinking of buying a life insurance policy for your child, it’s best to do so as early as possible. As mentioned, a policy purchased at a younger age is typically cheaper. The older a person gets, the more expensive the policy. 

Once you buy a policy, you can lock in at your rate and benefit on your child’s behalf. Once an adult, your child can then transfer the policy onto their own name. 

Furthermore, your child may be able to transfer the policy without the need to undergo a medical exam. A big perk of getting life insurance when they are a newborn is in the case of a medical issue at some point in their life. Which would then make a life insurance policy much more expensive if they are past infancy. By purchasing a plan while your child is young and healthy, you avoid any potential issues related to health and financial costs which may arise as they get older. 

Plus, buying a policy earlier on can give your child the opportunity to take advantage of the investment and its growth in value over time. 

Should You Get Newborn Life Insurance?

Before you buy a life insurance policy for your newborn, consider the following first:

  • Financial goals that life insurance may help with
  • How a policy may fit in with other financial plans you may have for your child
  • Investment options 
  • Cost 
  • Policy coverage

Speak with an investment advisor to discuss your options and help you decide whether a life insurance policy for your child makes sense for you.

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Newborn Life Insurance FAQs

How much life insurance should I have for a new baby? 

Newborns don’t usually need a life insurance policy, but you may want to consider one if you’re thinking of starting an investment portfolio for your child. Some policies come with a cash value component, which can serve as an asset that will appreciate in value over time. And if you want to take precautions in case something happens to your child, a policy can cover costs for end-of-life matters.

Does a life insurance policy cover death in childbirth?

If a mother passes away during childbirth and has a life insurance policy, her death will be covered, but not the child’s life.

Should I get life insurance before having a baby?

If you’re considering getting life insurance, it’s recommended that you buy a policy before you have children, or before getting pregnant. The price of a policy is usually more affordable when you’re healthy, so being pregnant when buying life insurance might make it more difficult to secure a policy at a reasonable price.

Can I get a life insurance policy for a baby?

Yes. Life insurance is available for babies and children. Most policies for kids are available as part of a whole life insurance policy with a cash value component. When the child becomes an adult, they can assume ownership of the policy in their name, keep the coverage as is, cash in the value of the policy, and even cancel it.

Final Thoughts

A life insurance policy for your child offers great perks. Not only does it provide financial protection in the event of a tragedy, but it can also provide your child with a valuable investment that they can see grow well into adulthood. Speak with an advisor to see if a life insurance policy is right for your baby.

Lisa has been working as a writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same. She's used a variety of financial tools over the years and is currently growing her money with Wealthsimple, while stashing some capital in a liquid high-interest savings account so that she always has a financial cushion to fall back on. She's also been avidly using her Aeroplan TD credit card to collect as many Aeroplan points as possible to put towards her travels!

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