Financial Security from the Start: Life Insurance for Newborns
There are many reasons why a parent or grandparent should take out some form of permanent life insurance coverage on a newborn, and we’ll cover them all. But here’s one you probably haven’t heard before: You control the money.
There are many reasons why a parent or grandparent should take out some form of permanent life insurance coverage on a newborn, and we’ll cover them all. But here’s one you probably haven’t heard before: You control the money.
When you purchase life insurance for your child, you are the owner of the policy. In the case of permanent coverage, such as whole life insurance, this means you stay in control of the policy, including the cash value¹, which serves as an investment account that grows tax-free. Some will choose to transfer the ownership of the policy to the child after 20 years, but you’re under no obligation to transfer the policy to your child or grandchild until you think they’re ready to handle the possibility of taking on payments as well as the maturity to make wise decisions with a potentially large sum of cash at their fingertips.
3 reasons you may not be ready to transfer ownership
Now, look ahead 20 or more years and consider why you might want to keep control of the investments in your permanent life insurance policy. Imagine these three scenarios:
- The cash portion of your policy has increased substantially, and you fear that your beneficiary will dip into it for something frivolous.
- You don’t feel that your beneficiary is mature enough to understand the long-term potential wealth-building effect of investing their money, and suspect they might spend it before it has time to enjoy decades of compound growth potential.
- You would prefer to give your beneficiary money from time to time, perhaps to pay for education, but you’re not ready to hand over the keys to the vault, so to speak.
In all these examples, you’d have a good reason to keep the policy in your name and continue to look out for your child or grandchild’s long-term interests until you feel they can take it over.
Why life insurance for newborns is important
It’s impossible to predict what path a child will take in life. And these days, it’s taking longer for young people to find their footing and choose a career. But you can count on the fact that they will grow up, need money, and will probably apply for life insurance at some point.
If they have health issues, getting life insurance as an adult might be expensive or impossible. But even if they are very healthy, they might want to ride a motorcycle, take up scuba diving, or try heli-skiing. They may want to work or volunteer in a high-risk nation. All these things could make it difficult to get life insurance in the first place. But if they already have coverage, thanks to you, these high-risk factors won’t prevent them from being insured because a child with a paid-up whole life insurance policy has guaranteed coverage for life. That’s if you choose to lock in coverage long before your kids or grandkids even know what life insurance is.
Let’s take a closer look at how these life insurance options work and how you can use them to set your newborn up for financial security.
Types of life insurance policies for newborns
The most common types of life insurance are called permanent life insurance (which includes whole life) and term life insurance. As a parent, you can only buy your baby the permanent option. Term insurance isn’t relevant because a child doesn’t have an income or mortgage to protect temporarily. But that same child can most definitely benefit from the investment component and lifetime coverage that comes with a permanent life insurance policy.
There are a couple of types of permanent life insurance. Whole life insurance never expires as long as you continue to pay your monthly or annual premiums (i.e., the amount you pay for an insurance policy). A portion of each payment is set aside in the cash value of your policy where it grows tax-free. In the case of a newborn, the money has decades to benefit from the power of compound interest.
20-pay whole life insurance is also a form of permanent coverage. As the name suggests, you make payments for 20 years and then you’re done. You will still be considered the policy owner and your child will have a guaranteed life insurance payout for as long as they live.
How does 20-pay whole life insurance for a newborn work with Serenia Life?
As with any life insurance policy, as the policy owner you maintain control of the policy and can withdraw money from the cash value to help with things like tuition. But with Serenia Life, you and your child will be considered members, giving you both access to the full range of unique member benefits², with a total value of more than $3,500.
When you’re ready, and your child is of legal age, you can transfer ownership of the policy to them, including access to the cash value and the dividends.
How much does life insurance cost for a newborn?
The best life insurance for a newborn is the combination of coverage that lets you reach your goals within your family’s financial plan. Whether you want to ensure eligibility later in life or lay the foundation of wealth building (or both!), a Serenia Life advisor can find you the right coverage for your budget.
Here are several estimates prepared with the assumption that a parent or grandparent is purchasing a life insurance policy for a healthy newborn.
| Type of Coverage: Whole Life | ||
|---|---|---|
| Amount of Coverage | Estimated Monthly Cost | |
| Male | Female | |
| $25,000 | $21.15 | $19.58 |
| $50,000 | $36.45 | $33.30 |
| $100,000 | $61.20 | $57.60 |
| Type of Coverage: 20-Pay Whole Life | ||
|---|---|---|
| Amount of Coverage | Estimated Monthly Cost | |
| Male | Female | |
| $25,000 | $31.95 | $31.28 |
| $50,000 | $57.15 | $56.25 |
| $100,000 | $102.60 | $100.80 |
Benefits of newborn life insurance
No one wants to imagine the loss of a child. But In the tragic event of a child’s death, the death benefit (i.e., a payment made to designated family members, other loved ones, or the charity of choice after the insured’s death) can allow parents to take time off work to focus on the tough task of coping with their loss.
Beyond the guaranteed death benefit, here are some other unique advantages of purchasing whole life insurance for a newborn.
| Benefits of Whole Life Insurance for Newborns |
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Common concerns and misconceptions
At first, the idea of buying life insurance for a newborn might seem absurd. But as you’ve seen, there are many solid, long-term goals you can help your children achieve by locking in a lifetime of coverage.
Here’s what we say to some of the biggest misconceptions about life insurance for kids.
‘Newborns don’t need life insurance’
True. But adults do. Locking in coverage as early as possible means your child or grandchild will always be eligible for coverage.
‘Life insurance is a poor investment’
Not true. Compared to any other investment with the same level of risk, it’s very competitive. Don’t discount the value of low risk and steady returns over time.
‘Life insurance is expensive’
Not exactly. That depends on what you consider good value for money. How many other investments provide a guaranteed payout that is tax free?
‘Newborn life insurance is like expecting to cash in on something horrible’
Not at all. It’s about believing the future is full of possibilities and giving your kids the means to enjoy it with greater financial security. And remember, the longer they live, the more valuable the policy becomes – it’s a long-term financial planning strategy. In the event the unthinkable were to happen, you’d have the time, space, and resources to properly grieve your loss.
Why choose Serenia Life for newborn life insurance?
As a member-based organization that’s been around for nearly 100 years, we encourage kindness by sharing a portion of our profits through community outreach, fundraising, and unique member benefits² that help Canadians support their family, their community, and the causes they care about. The more we grow, the more we can give.
We provide members with access to a growing collection of member benefits that make a positive impact on their lives and the lives of others, such as:
- $1,000 post-secondary scholarships
- $250 seed funding towards fundraising events
- Free digital wills (value: $189), or money towards drafting/updating a will through a lawyer
and much more - A free financial literacy book for members aged 0-12 years old (while supplies last)
View a full list of our member benefits
Proof is in the payout
We’re proud of our incredible claims history that includes an approval rate that consistently exceeds 99.9%³.
Is newborn life insurance worth it?
When you weigh the long-term benefits and opportunities you create for your children or grandchildren decades from now, the return on your investment can be enormous. Not to mention, the peace of mind is immeasurable.
Let us help
To find out whether newborn life insurance is right for you, talk to a Serenia Life advisor about the cost and how much such a policy can complement all the other parts of your financial plan.
Disclaimers
¹Cash values are accessible via a withdrawal, policy loan or surrender. These may be subject to taxation and a tax slip may be issued. Accessing the cash value of the policy will reduce the available cash surrender value and death benefit.
²Serenia Life Financial’s member benefits and programs are not contractual. They are subject to change and maximum funding limits.
³Life insurance claims statistics 2018-2023
