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Fund Your Children’s Retirement Now
As a parent, one of the many challenges you face is finding a way to ensure your child’s financial security over the course of a lifetime. In planning for this goal, it’s important not to overlook the role that Universal Life insurance can play.
While the notion of buying Universal Life insurance for a child may have morbid overtones for some, it can be a very effective wealth transfer strategy and a worthy choice of additional savings for a child or grandchild’s benefit.
The tax efficiency and attribution rules of Universal Life insurance, combined with a long time horizon, allows parents and grandparents to build a substantial nest egg that can be used by their children or grandchildren when it comes time for them to retire.
A children’s life insurance policy is a flexible way to provide your child or grandchild with insurance coverage, a financial head start, and lifelong peace of mind should they choose to keep the policy in force.
By taking out children’s life insurance when they are in good health, you’re giving them protection that will stay with them for life.This can be a huge advantage for your children, especially if their health declines.
Premiums are lower due to children’s young age and good health.
If they decide to keep their insurance when they are adults. They can choose term, permanent or universal life insurance.
Some insurance policies, such as critical illness disability insurance, allow you to add more coverage.
If your child were to die, you would have financial protection that would enable you to take the time you need.
We all know how important it is to have life insurance, but it’s a much more emotional decision to make when it comes to children, especially if they’re young.
Policy premiums are usually guaranteed, and can be designed to have a limited paying period such as 10 or 20 years at which time they are paid up. In addition, a portion of the premium goes toward accumulating cash value, which can be retrieved at any time.The plan can provide some or all of the education costs depending on the plan and need, without touching your savings account or retirement benefits.
A children’s term insurance rider is an optional feature available for most life insurance policies that offers term insurance protection for the children of the insured at an additional cost.
It offers lifelong coverage, with access to an attractive cash value and can be purchased independently of a parent's policy.
With the above in mind, whole life insurance can be considered the best type of life insurance option for children, especially compared to a child term rider.This should give you a clear picture of what features are in each policy to help you decide which one works better for your family.
An additional benefit bought on the parent’s or legal guardian’s insurance policy.
Only a parent or legal guardian can purchase it.
Provides coverage until the child reaches the age of 22 or 25 or until marriage, whichever comes first.
Coverage amount is limited, typically up to $30,000.
Doesn’t build cash value.
You make premiums payments throughout the policy term.
Dependent rider, added on to parent’s or legal guardian’s insurance policy.
Coverage amount remains the same.
An independent life insurance plan purchased specifically for a child
A parent, legal guardian, or grandparent can purchase it.
Provides lifelong coverage.
Can buy a policy with a large death benefit.
Builds cash value.
You can choose to pay off the policy early, say in 10 or 20 years. The coverage, however, lasts as long as the insured lives.
Independent, individual insurance policy.
Coverage amount can increase with dividends from the policy
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The answer is YES.
Canadian parents who want to save for their children’s higher education have a strong savings tool at their disposal — the Registered Education Savings Plan (RESP). Yet, an RESP alone may not be enough to cover your kids’ higher education.
The maximum lifetime amount you can contribute to a child’s RESP is $50,000. Given the rate at which tuition fees are rising, this amount may prove insufficient to cover the cost of a college education. Also, funds from an RESP can only be used for pre-approved educational institutions.
Because of these limitations, many parents in Canada use whole life as an alternative to an RESP or to supplement it.
Insurance for children provides both permanent insurance coverage as well as a financial plan. The savings and investment component of the whole life insurance policy can pay for college. The funds can be used for any financial need, be it at an educational facility of one’s choosing, a down payment for a home, capital for starting a business, or anything else to help a covered child build their life or livelihood.
Funds can be used for any purpose, such as education, a mortgage down payment, buying a vehicle, or starting a business.
Cash values can be accessed at any time.
Borrow against cash value of policy with no tax implications.
No maximum limits to coverage or cash value within policy.
Generally lower volatility returns.
No matching government contribution.
Funds can only be used for education.
Can only be accessed once enrolled in pre-approved educational program.
Taxed upon use by beneficiary.
Max lifetime contribution limit: $50,000.
May be exposed to volatility depending on chosen investment plans.
Contributions matched by the federal government, up to $500 a year.
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