Hmmm, life insurance for a new born baby sounds highly suspect, doesn’t it? As we all know companies are always searching for new ways to get people to spend more cash and life insurers are no exception.
There’s something a little bit chilling about combining the celebration of birth with life insurance…RIGHT?
Well, I can honestly say I don’t feel this way. Sure death and illness aren’t things we really want to think about, but they’re part and parcel of life.
The thing is, when you’re talking about life insurance for a new born baby there are more perks than immediately come to mind and it’s not all morbid. So let’s take a look now to see if this coverage is something you should consider…and why.
Why Should You Take Advice from Me?
My name is James Heidebrecht and I’m a father, husband, and the founder of Policy Architects. Life insurance is my day gig which gives me some pretty good insight into the products, companies and the newest underwriting changes that are making waves in the market. As an independent life insurance agent, I have access to the best insurers in Canada.
I’m not tied to any specific company, so I’m in a great position to find you the right coverage at the best possible rates.
When I started working as an agent I noticed that there was a need for down to earth information about life insurance. You should get some user-friendly info BEFORE you contact an agent. That’s why I started this blog.
As a family guy, I know first hand just how important it is to speak with someone who gets it. So if you’re looking for stellar advice give Policy Architects a call. We put our clients needs first.
So What is Life Insurance and Why Does ANYONE Need It?
The concept of life insurance is pretty simple. All of us are financially vulnerable during specific periods in our lives. It’s most worrisome when we have dependents (children or otherwise), a mortgage and debt…
…but this extends to the day we die as funerals are costly and bills don’t evaporate when we move on. This is where life insurance companies come in. They provide a financial safety net for a period of time for an agreed to price. There are two main types of life insurance: term and permanent coverage.
Term is the most affordable option as a death benefit is not guaranteed so the life insurance company passes these savings on to you. In a nutshell you:
- Meet with an independent agent and go through your needs to select the dollar value for the coverage you need (ie. $250,000, $500,000, $1 million, etc)
- Determine the period of time you require coverage. This is the term and it’s typically 10, 20 or 30 years
- Fill out a life insurance application with your advisor and answer a bunch of health and personal questions
- Depending on your age and coverage amount, you may be required to take a medical exam (this is for a traditionally underwritten policy, but there are other options if you want to skip the exam)
- Wait for the life insurance company to approve, rate, postpone or decline your application. By the way, approximately 80% of all life insurance applicants in Canada are approved at standard or better rates! The rating you receive (ie. standard non-smoker) will determine your monthly premium payments (you can also pay yearly or a lump sum depending on your needs)
Coverage 'til the Day You Die
Permanent insurance is much more expensive because you’re guaranteed to receive a payout as long as you keep up with your premiums. This coverage comes in many different packages, but most have a cash value accumulation component that can be used throughout your lifetime.
Term life insurance works for most people most of the time. But permanent life insurance is a great tool if you need coverage until the day you die and you have enough cash to maintain the payments.
If You Have Debt & Dependents You Need Life Insurance
This brings us to the question I hear a LOT! Why does ANYONE need life insurance?
Because it takes a lot of money to live, it’s as simple as that.
If you have a double income family you know exactly what I’m talking about. If one of you loses your job, any savings accumulated is quickly spent. If one of you dies, that income dies with you, PERMANENTLY!
Maintaining a family on a single income is even more frightening. But it doesn’t have to be. A little planning can avoid a lot of heartaches.
Life insurance provides a safety net for your family so they can continue to live the life they’ve become accustomed to if something terrible happens.
This is all well and good, BUT, what does this have to do with babies?
Life Insurance for a New Born Baby
As you can see most of what I’m talking about has to do with the loss of income. This is the main reason people purchase life insurance – especially term life insurance. There are other reasons to buy life insurance. One of the biggest is for final expenses. This is one of the most underestimated costs people encounter in their lifetime.
Why would you ever think about the cost of a funeral for your child? Man, that’s just plain depressing. Especially when you’re talking about a new born baby. Unfortunately, life happens and people die. Even very young people. The cost of a funeral is staggering and for most, it’s a serious financial setback. Hey, who has an extra $10K sitting around – and especially in an extraordinarily stressful period.
The rationale behind purchasing final expense insurance for an adult is the same as it is for a child. It covers the cost of a funeral and keeps the family from being thrown into a financial tailspin when they least need it. Here are some other thoughts:
A life insurance policy for a new born baby is incredibly affordable so for a few bucks per month you can make sure that you’re family is protected in a worst-case scenario.
But that’s not all! The good news is, this sort of situation rarely happens and it’s not really the main reason I would recommend life insurance for a new born baby.
1. Life Insurance for a New Born Baby: Guaranty of Insurability & Affordability
Life insurance isn’t a given. You have to qualify for a policy and the older you get the riskier it is to insure you. This is why I always encourage people to buy life insurance when they are young and healthy.
It doesn’t get much better than a new born baby. You won’t be declined – unless there is something terribly wrong and to top it off the premiums are super affordable.
Do you know how many people I speak to that don’t qualify for traditionally underwritten policies? Too many. That’s because they wait until they are unwell and THEN call me. You’d be shocked. I hate telling people that they’re out of luck. The sad part is no one wants to think about life insurance when the going is good.
Purchasing a life insurance policy for your new born locks them in at VERY affordable rates and protects them no matter what the future holds, especially if you have a Guaranteed Insurability Rider on the policy.
What's a Guaranteed Insurability Rider?
This is a rider that guarantees insurability for your child to purchase more insurance without evidence of insurability. This is a terrific option for your child to have. This means if they happen to develop a medical or psychological condition that boots them into a high-risk category – they still can buy life insurance at a reasonable rate. The best part? This rider only costs a few dollars more per month on the policy. Planning ahead helps your child protect his or her loved ones in the future…
…and it’s one of my favourite reasons to buy life insurance for a baby.
I bought my daughter a $250,000 whole life policy a month after she was born. It has a guaranteed insurability option on it which says that between the ages of 25 and 45 she can qualify for more life insurance without any medical underwriting.
None of know how healthy we’ll be later in life, but we can assume we won’t be as healthy in our 40s as we are in our teens. If you wind up with weight issues, diabetes, a melanoma or anything else, you can still qualify for greater life insurance without health being a factor.
2. Life Insurance for a New Born Baby: A Nest Egg for the Future
Life insurance for a new born baby is a gift. As I mentioned above there are two types of life insurance permanent and term. If you’re thinking about buying this type of coverage it’s likely a permanent policy is what you are considering. As I mentioned above it costs more than term but at the end of the day, it’s much more affordable than purchasing as an adult. Also, the cash value accumulation can be used at a later date.
For example, a $250,000, 20 Pay Whole life policy for a one year old girl with Equitable Life costs you $87.14 per month. This means at age 21, this young woman has $250,000 of paid up permanent life insurance with a guaranteed cash value of $10.654. If you add Equitable’s flexible guaranteed insurability rider, she has the option of purchasing up to $500,000 of additional coverage (within prescribed limits) from age 21 to age 45. This rider costs you an additional $6.31 per month bringing your monthly total up to $93.45.
Check it out! You dump $22,428 into a $250,000 whole life policy for your child over 20 years at which point it has a guaranteed cash value of $10,654. Not to mention, she’s eligible to buy $500,000 of additional insurance at standard rates. When she’s 30, the policy will have a cash value of between $14,720 up to $42,000 depending on how the investment account inside the policy performs. The cash value and death benefit continues to grow over time and by the way, historically, Equitable Life has one of the best performing whole life products in Canada.
Life Is Expensive
College, university and homes cost money. Buying a permanent life insurance policy for your new born baby gives them access to funds later in life. This is why you need to speak to an independent life insurance agent today. There are many different types of permanent life insurance – some more affordable than others. It’s also a complicated product that needs review BEFORE you sign on the dotted line.
If you want to the most comprehensive product at the best possible rates, give Policy Architects a call. We can help you sift through all the options because not all life insurance companies are created equal.
What is the Best Life Insurance for Babies?
You’ve decided that life insurance for a new born fits your needs. What’s the best life insurance policy for a child? This brings us back to what type of life insurance makes the most sense. As I mentioned above permanent life insurance is a terrific fit for protecting your child, but that doesn’t rule out term coverage. Now you may be scratching your head wondering what the heck I am talking about.
Permanent insurance offers a guaranteed payout and a cash value accumulation feature which benefits your child in the long run…but what if you can’t afford it?
With Ivari, you can lock in $250k of 30 year term coverage for your child at $25.20 per month. The best part? You can achieve guaranteed insurability with this option too as it can be converted into a permanent policy at any time with no additional underwriting. It’s a win, win. Some other benefits include:
- your child is entitled to non-smoker rates no matter what happens in the future
- if your child takes up a hazardous sport in their early 20’s, no need to worry
- You can add a critical illness protection rider for up to $75,000 at a very reasonable cost…we’ll save the critical illness for children discussion for another post
Another option is a Universal life policy. This is permanent coverage - but it's far more affordable because it doesn't usually have the same cash value accumulation. Check out my latest article about Universal Life Insurance if you want more information about this type of policy.
Planning is the Key to Success
After being on this planet for more than 50 years I can say honestly that planning is the key to success. This comes from many years of NOT doing a stellar job when it comes to this aspect of my life. Like many people, I have some regrets. I sure wish I purchased a house in Toronto back in the 90’s and quite frankly I should have gotten my life insurance coverage in place years before I actually bit the bullet.
The good news is I learn from my mistakes.
Family planning can save your loved ones tens of thousands of dollars and life insurance for new borns is no exception. If you can afford it why not buy your children life insurance? Set up correctly it gives your kids access to future insurance that’s affordable, a nest egg to help them pay for a house or college and it can help your family in case something tragic unfolds. All of this and it’s super affordable.
Call Policy Architects TODAY
Whether you’re planning new born life insurance coverage, looking at term for your vulnerable years or simply starting your estate planning – Policy Architects can help.
We assist families through Canada with their life insurance needs. Because we’re a boutique agency we prioritize you as an individual. Hey, you’re a client for life after all.
Don’t forget, the best way to get the most affordable life insurance rates is to work with an independent life insurance agent. If you’ve been reading any of my posts you already know that not all life insurance companies are created equal.
Finding you the best fit for your unique needs is how we set ourselves apart from the pack. Call us today!