Personal Finance

Life Insurance Q&A - w/ FAQ Section

  • Last Updated:
  • Mar 22nd, 2017 1:23 am
Jr. Member
Sep 23, 2013
180 posts
87 upvotes
Windsor, Ontario
vivmk20 wrote:
Mar 20th, 2017 6:24 pm
I am planning to get permanent life insurance for my son who is 14 year old. As I understand it will be much cheaper to get permanent life insurance for him at this age where I will contribute for next 4-5 years and when he starts earning then he can contribute. I am looking at 1 M policy.

Any suggestions?
Is there any reason for getting the life insurance other than the cost factor of "now vrs later"? A $1 million dollar permanent insurance policy will still cost quite a bit, even at a younger age. Will your son want to take on that kind of premium when he starts working? Where does this insurance plan fit into a bigger financial picture? It's hard to make recommendations on a plan like this without a lot more information.
Jr. Member
Nov 16, 2013
170 posts
15 upvotes
You are right the most important factor is cost now and later. Also this would be the minimum amount to provide protection for his future family.
Jr. Member
Sep 23, 2013
180 posts
87 upvotes
Windsor, Ontario
vivmk20 wrote:
Mar 20th, 2017 7:56 pm
You are right the most important factor is cost now and later. Also this would be the minimum amount to provide protection for his future family.
If you don't mind me asking a few questions, your son is 14 and still financially dependent on you do you have your own life insurance or critical illness insurance? Do you have any other children? Any Debts? Are your investments being fully utilized? Sons RESP? What's your income, cash flow, cash reserve situation like? What will your son's future income approximately be?

I understand wanting to get a good price on an insurance plan, but everything I listed get's prioritized over a child's life insurance. I'd even pick critical illness insurance for a child before life insurance (or some time of hybrid product).

I also know you only want to know which company has good permanent life insurance for a child, the truth is, a lot do. Sunlife, Desjardins, Canada Life, etc.
Deal Addict
User avatar
Sep 15, 2009
2706 posts
1000 upvotes
Toronto
vivmk20 wrote:
Mar 20th, 2017 6:24 pm
I am planning to get permanent life insurance for my son who is 14 year old. As I understand it will be much cheaper to get permanent life insurance for him at this age where I will contribute for next 4-5 years and when he starts earning then he can contribute. I am looking at 1 M policy.

Any suggestions?
I agree with what Steve has mentioned above. While down the road it may have been a smart move to get your son started on a permanent life insurance policy today, you need to consider cash flow and priorities. If after all is taken into consideration and it is still your intention to set your 14 year old son up for a permanent policy, there are a few things to consider before you can even get coverage on him. Do you and your spouse have coverage on yourselves? if so, how much? If not, why not? Doesn't matter if it is term or permanent but the insurance company is without a doubt going to take this into consideration. There are restrictions as to how much one can purchase for a child/minor/dependent relative to the amount of coverage the adult owner/parent has on their own lives. Its a multiple in most cases. It should come without question or surprise as to why they have these measures in place.

The other issue is: what if your son doesn't want to take over the premium? What if he is incapable financially? The cost of a $1,000,000 permanent policy will run you a fair bit (especially if it is participating and/or paid up whole life). Do you plan to purchase a "life time" pay policy? meaning you would continue to pay premiums for life, or would you purchase a "paid up" policy that is contractually paid for over a number of years? Most common is 20 year.

While setting your children up with permanent coverage now is indeed cheaper than it will be years down the road for the same coverage, not withstanding the cost, does your child really need $1,000,000 today? If your son is 14 and likely will not have a family of his own (so nobody dependent on his income) until 10-20 years from now, you might as well purchase a lower amount that has the potential to grow over time - when the child really needs it. The death benefit should not be what is important now, but what it will be years down the road.

For a Life pay you are looking a minimum of $300/month and for a 20 pay, closer to $500/month + depending on company, type, guarantees, etc.
Certified Financial Planner (CFP)

"Our goals can only be reached through a vehicle of a plan in which we fervently believe, and upon which we must vigorously act. There is no other route to success...."
Newbie
User avatar
Dec 30, 1969
19 posts
6 upvotes
Vancouver
vivmk20 wrote:
Mar 20th, 2017 6:24 pm
I am planning to get permanent life insurance for my son who is 14 year old. As I understand it will be much cheaper to get permanent life insurance for him at this age where I will contribute for next 4-5 years and when he starts earning then he can contribute. I am looking at 1 M policy.

Any suggestions?
In addition to the great advice from SteveDFSin and wesboag, I did a bit of digging through various life insurance underwriting guidelines. Because they do not allow me to copy the text, I have attached a bunch of clippings from Manulife, Empire, Equitable and SunLife. Bottom line is that they need very good reasons why the insurable interest for a child is $1 million. If you're going down this road, you might want to consider a base amount of insurance and a guaranteed purchase option rider that allows for additional purchases in the future without medical evidence.
Images
Newbie
User avatar
Dec 30, 1969
19 posts
6 upvotes
Vancouver
vivmk20 wrote:
Mar 20th, 2017 6:24 pm
I am planning to get permanent life insurance for my son who is 14 year old. As I understand it will be much cheaper to get permanent life insurance for him at this age where I will contribute for next 4-5 years and when he starts earning then he can contribute. I am looking at 1 M policy.

Any suggestions?
Hello again - I came across the attached graphic that I find very useful in anticipating the changes we go through in various insurance needs over a lifetime. This is only an example and everyone has a different story.
Images
Jr. Member
Nov 16, 2013
170 posts
15 upvotes
SteveDfsin wrote:
Mar 21st, 2017 11:24 am
If you don't mind me asking a few questions, your son is 14 and still financially dependent on you do you have your own life insurance or critical illness insurance? Do you have any other children? Any Debts? Are your investments being fully utilized? Sons RESP? What's your income, cash flow, cash reserve situation like? What will your son's future income approximately be?

I understand wanting to get a good price on an insurance plan, but everything I listed get's prioritized over a child's life insurance. I'd even pick critical illness insurance for a child before life insurance (or some time of hybrid product).

I also know you only want to know which company has good permanent life insurance for a child, the truth is, a lot do. Sunlife, Desjardins, Canada Life, etc.
Thanks,

All these are great questions and I am considering all of them to decide about his insurance. Yes I have insurance for me and spouse. We have done RESP for him. Debt is only the mortgage.

Thanks again.
Jr. Member
Nov 16, 2013
170 posts
15 upvotes
wesboag wrote:
Mar 21st, 2017 3:07 pm
I agree with what Steve has mentioned above. While down the road it may have been a smart move to get your son started on a permanent life insurance policy today, you need to consider cash flow and priorities. If after all is taken into consideration and it is still your intention to set your 14 year old son up for a permanent policy, there are a few things to consider before you can even get coverage on him. Do you and your spouse have coverage on yourselves? if so, how much? If not, why not? Doesn't matter if it is term or permanent but the insurance company is without a doubt going to take this into consideration. There are restrictions as to how much one can purchase for a child/minor/dependent relative to the amount of coverage the adult owner/parent has on their own lives. Its a multiple in most cases. It should come without question or surprise as to why they have these measures in place.

The other issue is: what if your son doesn't want to take over the premium? What if he is incapable financially? The cost of a $1,000,000 permanent policy will run you a fair bit (especially if it is participating and/or paid up whole life). Do you plan to purchase a "life time" pay policy? meaning you would continue to pay premiums for life, or would you purchase a "paid up" policy that is contractually paid for over a number of years? Most common is 20 year.

While setting your children up with permanent coverage now is indeed cheaper than it will be years down the road for the same coverage, not withstanding the cost, does your child really need $1,000,000 today? If your son is 14 and likely will not have a family of his own (so nobody dependent on his income) until 10-20 years from now, you might as well purchase a lower amount that has the potential to grow over time - when the child really needs it. The death benefit should not be what is important now, but what it will be years down the road.

Thanks for the excellent advice . This is really of great help. I will consider above points.

For a Life pay you are looking a minimum of $300/month and for a 20 pay, closer to $500/month + depending on company, type, guarantees, etc.
Jr. Member
Nov 16, 2013
170 posts
15 upvotes
RichardVetter wrote:
Mar 21st, 2017 6:37 pm
Hello again - I came across the attached graphic that I find very useful in anticipating the changes we go through in various insurance needs over a lifetime. This is only an example and everyone has a different story.
Thanks Richard,

I was not aware that it has to be certain % of our insurance. Probably I have to reduce the amount of insurance for him

Thanks for the screen shots.
Newbie
User avatar
Dec 30, 1969
19 posts
6 upvotes
Vancouver
vivmk20 wrote:
Mar 21st, 2017 8:31 pm
Thanks Richard,

I was not aware that it has to be certain % of our insurance. Probably I have to reduce the amount of insurance for him

Thanks for the screen shots.
You're welcome. Bottom line is that a case needs to be made for the degree of need that there is for the coverage. The argument for buying coverage to cover future needs is a valid one but there are limits to which a carrier is willing to go. Best approach is to work with your insurance advisor to build a solid case.
Newbie
User avatar
Dec 30, 1969
19 posts
6 upvotes
Vancouver
vivmk20 wrote:
Mar 21st, 2017 8:31 pm
Thanks Richard,

I was not aware that it has to be certain % of our insurance. Probably I have to reduce the amount of insurance for him

Thanks for the screen shots.
You're welcome. Bottom line is that a case needs to be made for the degree of need that there is for the coverage. The argument for buying coverage to cover future needs is a valid one but there are limits to which a carrier is willing to go. Best approach is to work with your insurance advisor to build a solid case.
× < >
Rotate image Save Cancel

Top