Wednesday WTF: August 30, 2017
Insurance for Children
I speak about the importance of protecting yourself with insurance quite regularly in my posts. Having the proper amount of insurance in place to protect your health, your assets and your sanity is key to any successful financial plan. Almost as important is protecting your children with insurance. This fact is missed by many people and often becomes an afterthought. What many people seem to forget is that when in a family unit, the health of every member is crucial. Many families have fallen on hard times when a child gets sick. Often one or both parents have to miss significant time off work when this happens. This causes undue financial strain which only exasperates a bad situation. It is important to understand that the health of a child is precarious. You cannot predict through bad habits and environmental damages that a child will become sick like you can with an adult. Children are healthy until they are not. It strikes without warning and without prejudice. This is where insurance comes into play. Insurance for children serves two useful purposes. It provides the parents with useful funds at a time where they are much needed. It also slaps an “I’m Insurable” tag on the child that will protect them from future health problems in terms of insurability. In this post, I will talk about 2 forms of insurance that you can purchase for your child and the benefits of each.
1) Life Insurance for Children
This is always a touchy subject and for good reason. No parent ever wants to think of their child dying. It is very unlikely and definitely not pleasant to picture. What needs to be understood is that Life Insurance for a child is not specifically for the purpose of final expenses, although that is what it can be used for. The main purpose of Life Insurance for your child is to lock in their insurability for future purposes. You yourself probably have some form of coverage, if you don’t you should get some by the way. Your child will need some form of coverage as well one day. One simple fact is that the healthiest you will ever be is when you are younger. It is also the time when insurance is the cheapest. Buying Life Insurance for a child when they are young ensures that they will have coverage for life no matter what nagging illnesses may occur. You can transfer the ownership to the child when they are older and can even purchase additional benefits called “riders” that will allow that child to buy more insurance for themselves later on in life without having to provide medical evidence. These policies also build cash value and grow to a point where they are self-supporting and can be borrowed against or even surrendered for cash if desired. If you don’t think this is an issue let me explain my story. I myself was denied coverage from my own company. This was due to having been diagnosed with Ulcerative Colitis when I was 16. I look pretty healthy, don’t I?
Would You Think I am Uninsurable?
Well, not in the eyes of the insurance company. This forced me to go to other carriers who insure “uninsurable” people for a far greater cost than it would have been with a traditional carrier. If I had obtained insurance when I was a child, I would have a very cheap or paid up policy that at this time in my life (33 years of age) would be invaluable. My diagnosis at the age of 16 would have been irrelevant and I would be in business. Life Insurance for children needs to be thought of as an asset as opposed to a liability that will help your child transition into adulthood seamlessly.
2) Child Critical Illness Insurance
Here is another scary thought for parents. No parent wants to think of their child getting sick when they are young. The sad truth is that it happens quite frequently. It is why children’s hospitals are ever-expanding. The good thing about it is that children are resilient and usually fight through illness. The unseen cost is that of the parent who for the love of their child will take time off work to be there for support. This often causes an undue financial burden that can cripple some family’s cash flow. Critical Illness Insurance provides a lump sum benefit after diagnosis and those funds can allow the parents to take time off work to help their ailing child. They can also seek out the best treatments possible, often ones that are not covered by our single-payer health care system in Canada. Once again premiums for Child Critical Illness are low because of children being, for the most part, healthy. Here is the real kicker. Just like Critical Illness Insurance for adults, child CI can give all the premiums back to the family if it is never used. This is called the return of premium rider and is a slam dunk in my opinion. If the worst happens and the policy is needed, you receive a lump sum in a desperate time. If it is not used you receive all your premiums back. If only car or house insurance worked this way.
Knowing firsthand how insurability has affected my life I try my best to inform my clients of this issue. Ideally, all children would have insurance on them so they would never have to do a medical in their lifetime. It truly gives them a leg up when starting adulthood. I myself have seen clients of mine who are 75 years old with policies that are 74 years old. Some of these policies are worth 10 times their original face value and have paid for themselves many times over. There is not one person I have met that regrets having the policy and most end up buying one for their children or grandchildren. I know that when I become a grandparent my gift to my grandkids will be an Education Savings Plan and a Life Insurance policy. They will far outlast the video games and sneakers that light up when you walk.
Thanks for reading my post today on Insurance for children. Don’t forget to tune in tomorrow for Thursday Trim the Trash Time when I go over the things that parents waste the most money on. If you have any questions regarding protecting your children with insurance don’t hesitate to contact me at joe@budgetboss.ca. Have a great day friends!!
“Before I married, I had three theories about raising children and no children. Now, I have three children and no theories.” – John Wilmot
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Joseph James Francis is a Financial Advisor. You can find him on various social media platforms and at www.budgetboss.ca