Life Insurance On Your ChildI have two children -- a 5 year old son and a baby daughter. Do I have life insurance on them?
The answer is an emphatic NO!
Those companies who try to convince you to buy life insurance for your children are banking on your desire to "have the very best" for your children. They show you pictures of smiling babies, and they convince you that life insurance is the way to "take care of their future". They are also banking on the fact that children are astoundingly hearty creatures who rarely die in this day of modern medicine.
If you really want to have the best for your children and prepare for their future, start an educational savings plan for them. In Canada, you can actually get up to $400 a year in addition to your contributions in grants from the government.
Further, the only reason that you might want life insurance on your child is to cover your child's funeral expenses. Again, you are better off saving money in the case of an emergency (of any kind) rather than buying life insurance for your child. Life insurance will only help you if your child dies. An emergency fund will help if your child is injured, or if you need the money for other family reasons.
Want to give a money gift to your child when they turn 21? You can always decide to gift the money from a savings plan to your child, in much the same way that many parents give their children a paid life insurance policy when they are older.
You'll likely give your child a larger money gift if you save; the amount of money that a child gets out of any "whole life" policy that you purchase is less than you'd get if you take the same amount of money and invest wisely. Why? Because a certain amount of the money that you pay towards any whole life policy is "premiums" that pay for the "insurance" component of the policy and that amount does not become savings.
We are focusing on paying down our mortgage and saving for our children's education. That should put us (and them) in a better position than any life insurance policy on their young lives ever would.