DAILY FINANCIAL TIPS – DAY 33 – WHY INSURE CHILDREN
These daily financial tips are designed to be short ideas covering different aspects of family and business finances. They are short pieces intended to provide information to enable individuals, families and businesses to make informed financial decisions. Not all tips will apply to every situation, but over the course of a year, most financial topics will be covered. Check in regularly and share with friends and associates.
Many people are surprised when I suggest putting insurance coverages in place for children. You can insure children as young as 2 weeks old. The primary reason for children’s insurance coverage is to protect their future insurability. While anything can happen to people of all ages (many childrens hospital wards are filled with children suffering from many afflictions), the primary reason is to provide longer term protection.
A general rule of thumb for insurance is: the younger we are, the less expensive insurance costs. The two biggest advantages children have in qualifying for insurance is: They are young (so costs are lower), and they are healthy – so easy to qualify without medical requirements. We never know what the future holds. I’ve always said, the worst thing in life could be something happen to ones children. Children insurance strategies protect them both while they are young and later in life.
While Children’s Life Insurance plans are common and familiar to many, I generally recommend a combination of Life and Critical Illness protection for children. In both cases, children plans can be structured so policies are fully paid up over 10, 15 or 20 years. This fixes the overall cost of the plan while providing a lifetime of protection. In most cases, a form of Whole Life Insurance is used for Life insurance needs. These plans act as both a savings plan and protection plan as they build cash values over the long term. Future insurability is further protected with Whole Life plans as the insurance values also increase/grow over time.
I feel strongly that Critical Illness should also form part of a children’s insurance strategy as the incidence of illness continues to grow. Cancer rates (currently in Canada, 1 in 2.4 Canadians will contract cancer in their lifetime) alone are increasing significantly (thankfully, survival rates are also increasing) and there are many other illnesses that are covered in Critical Illness plans. Like Life Insurance, children Critical Illness plans are generally structured so they are fully paid up in 20 years and provide protection for a lifetime. Critical Illness policies for children can also be structured with Return of Premium protection, so if your child lives a long and healthy life, all monies are returned tax free as cash.
As you consider providing a financial future for your children, consider including an element of Life and Critical Illness Insurance as part of the plans. These are like GIC with life warranties. Budget is always a concern, especially where multiple children are involved. Consider using gifts from family members from birthdays Bar/Bat Mitzvah or Christmas or other special occasions to fund children plans or allocate a portion of annual work bonuses to cover the costs. Discuss the different options for Children insurance plans with a licensed Insurance advisor who can put together different options that best suit your family circumstances.
Share these ideas with friends and family and come back to check out daily financial tips and ideas. If there are subjects you wish covered or questions, please email me and I’ll include them in future posts.