As the holidays approach, the desire to treat grandchildren or godchildren grows. However, beyond this gesture, what will remain of this gift in 5 or 10 years? What if, this year, you insured your grandchild instead? In addition to being preventive, this very affordable initiative could help them financially when they grow up.
What is the point and necessity of insuring a child?
Because children are not immune to serious illness, such a situation could seriously affect a family's financial health. However, critical illness insurance for children can make all the difference. In the event of a serious health problem, the tax-free benefit will provide parents with enough financial support to take time off work to care for their sick child without jeopardizing their financial security. On the one hand, as we will see later, it can provide financial support for the child after a certain number of years.
In what scenarios would insurance be beneficial?
Here are two examples among many possible cases:
- Estelle wants to protect her new grandson, Damien. Her daughter, who is self-employed, would have limited means and would not enjoy social benefits if she had to take time off work to care for him in the event of a serious childhood illness. Estelle's advisor suggests an insured amount of $25,000 (within her budget). This would protect Damien until he turns 75 for $278.75/year.
There is an automatic refund privilege of 75% of premiums paid at age 25 or on the 15th anniversary of the contract, whichever is later (at age 25 in our scenario). Damien could then, for example, contribute to his Celiapp to buy his first home! He can also simply remain insured for life without having to pay. - As Nathalie's godfather, Jean-François would like to contribute to a permanent life insurance policy with cash surrender values so that the policy increases in value over the years and becomes payment-free after a certain period of time. His Lussier advisor therefore suggests a participating policy payable over 20 years. The premium is $343.08/year. Jean-François plans to transfer it to Justin when he finishes his studies. Even if the contract is paid off (a real gift for his godson), it will continue to accumulate cash surrender values.
This will amount to $203,879 when Nathalie turns 65! If he had waited until she was 10 to insure her, the premium would have been slightly higher ($429.24/year) for a slightly higher accumulation at age 65, or $206,020 in cash surrender value.
At what age is it appropriate to consider insurance?
Let's take the example of parents of a child with juvenile diabetes. They will have very few financial resources to provide their child with the best possible treatment. Taking out insurance as a preventive measure will avoid such a situation. In general, it is advisable to act early and never wait until you suspect a health problem.
What type of product or coverage should you choose?
There are three options for life insurance:
- Economical: First, look at the options in your group insurance plan at work. It is also possible to add a rider to the parents' life insurance policy.
- Affordable: Term insurance (10, 15, 20 years or more) is an attractive option if you plan to convert it to a permanent whole life plan.
- Enhanced: This will protect your child for life at the same cost. For an additional premium, you can even add a payment waiver option for 10 or 20 years, for example.
Critical illness insurance coverage may also be available as a family rider or individually. Depending on your budget, it can be term or permanent. You can add a payment term rider (20 years, for example) or a premium refund rider at maturity.
A gift for today… and tomorrow
The holidays are a time for generosity. And the most beautiful generosity is the kind that lasts. This year, give gifts that won't fade away. Give courage for difficult days and resources for ambitious ones. Giving an investment, protection, or a contribution to an education fund is laying a solid foundation for your grandchildren's future independence.
If you would like to explore these options, Lussier's financial security advisors and financial planners will guide you. Contact us here or call 1-855-587-7437 to speak to one of them.
