Should You Get Life Insurance for Your Child? (Canada 2025 Guide)
Child life insurance is one of the most misunderstood products in Canada. Some parents swear by it. Others are unsure if it’s worth it. The truth is: child life insurance isn’t about replacing income — it’s about long-term financial planning, guaranteed insurability, and building a small but stable financial foundation for your child’s future.
This guide explains how child life insurance works, when it makes sense, and what Canadian parents should consider before buying a policy.
What Is Child Life Insurance?
Child life insurance is usually a whole life insurance policy taken out on a child by a parent, grandparent, or guardian. It provides:
- Lifetime coverage
- Guaranteed insurability for the future
- Cash value growth over time
Premiums are low because children are young and healthy, making whole life surprisingly affordable.
Why Parents Consider Life Insurance for Their Children
Child life insurance can provide several long-term benefits:
1. Guaranteed Future Insurability
Your child will always be able to get coverage later in life — even if they develop medical conditions that would normally make them uninsurable.
This is the #1 reason many parents choose it.
2. Cash Value That Builds Over Time
A portion of each premium builds tax-advantaged cash value.
Later in life, your child can:
- Borrow from it
- Withdraw from it
- Use it toward education or major expenses
- Keep the policy as a permanent asset
It becomes a small but meaningful financial foundation.
3. Coverage That Lasts a Lifetime
Unlike term insurance, child life insurance lasts forever. The policy does not expire, and the child can keep it into adulthood at the same locked-in rate.
4. Cost Predictability
Premiums never increase.
A policy purchased at age 1 is the same cost at age 51.
5. A Gift of Long-Term Security
Many grandparents purchase child life policies as a financial gift — something that grows with the child.
How Much Does Child Life Insurance Cost?
Child life insurance costs vary significantly depending on how the policy is structured.
Basic non-participating whole life policies can start at lower monthly costs, often in the $20–$35 per month range for $25,000–$50,000 of coverage.
Participating whole life policies funded over a lifetime typically fall higher, while limited-pay participating whole life designs (such as 10-pay or 20-pay with paid-up additions) — which many families prefer for long-term value and early completion — commonly range from $40–$80 per month for $25,000–$50,000 of coverage, depending on the insurer and design.
Why Growth Matters More Than the Face Amount
A $25,000 or $50,000 child life insurance policy may sound meaningful, but on its own, that amount doesn’t go very far decades later if the policy doesn’t grow.
The long-term value of child life insurance comes from participating whole life policies that earn dividends, allowing the coverage and cash value to increase over time.
Without dividends or growth, a small permanent policy remains a small policy — which limits its usefulness in adulthood.
Is Child Life Insurance Worth It?
It depends on your goals & financial priorities.
It may be worth it if you want:
- A stable financial asset for your child
- Guaranteed insurability for their adult life
- A policy they can take over later
- Predictable premiums that never change
It may NOT be worth it if you want:
- To focus on other child savings vehicles like RESPs & Education Savings
- A pure investment (there are better tools)
- Short-term financial returns
Child life insurance is NOT a replacement for RESPs or other investment tools — it’s a complement.
When Child Life Insurance Makes the Most Sense
Parents choose child life insurance when:
- There is a family history of medical issues
- They want to lock in life insurance early
- They want to give their child a policy they can use later
- Grandparents want to contribute something meaningful
- They prefer stable, guaranteed products
Can Children Be Declined for Life Insurance?
Yes — but rarely.
Some conditions may require simplified underwriting, but children generally qualify without issues.
That’s why locking in insurability early is a major advantage.
Should You Use Whole Life or Term Life for Children?
Children almost always use whole life because:
- Term life is only meant for income replacement
- Children do not have income
- Whole life builds guaranteed cash value
- Whole life lasts forever
Whole life is the correct structure for child policies.
Why Parents Should Have Adequate Life Insurance Before Insuring a Child
Before considering life insurance for a child, it’s important that parents have sufficient life insurance coverage in place for themselves — whether through term insurance, permanent insurance, or a combination of both.
The primary financial risk in a family is not the loss of a child’s income, but the loss of a parent’s income, care, and financial support. If a parent were to pass away prematurely, the financial impact on the household can be significant — including mortgage obligations, childcare costs, education funding, and day-to-day living expenses.
For this reason, life insurance companies generally expect parents to be adequately insured before approving or recommending child life insurance coverage. Child policies are designed to complement a family’s overall financial plan, not replace core protection for parents.
Once parental coverage is in place, child life insurance can make sense as a secondary planning tool — helping lock in future insurability, provide long-term stability, and create a policy the child can eventually take over in adulthood.
Bottom Line
Child life insurance isn’t for everyone, but it can be a valuable long-term financial gift — and a way to secure your child’s insurability for life.
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https://www.life-simple.ca/life-insurance-for-children