OB Report
September 2020
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Insuring Children or Grandchildren Creates a Lifelong Gift


By Debbie StuartCLU, CHS,
Estate and Insurance Planner,
Odlum Brown Financial Services Limited

gardeningAs a parent or grandparent, you want the best for the children in your life. Decisions you make today, like investing in Registered Education Savings Plans, can create lasting financial benefits for these younger generations. Purchasing life insurance for young children or grandchildren is another opportunity to create a meaningful financial legacy.

It may feel strange to contemplate buying insurance that covers the young life of your child or grandchild; however, hindsight is often 20/20. Imagine if your parents had purchased a policy for you when you were a baby, young child, teenager or young adult that lasted your entire life.

Life has speedbumps, and future health or lifestyle events not only happen but may restrict your child or grandchild’s insurability and impact future life insurance premiums. By securing appropriate coverage for your child or grandchild early, they can look forward to embracing life events, such as marrying, having children of their own, buying a home and/or establishing a business, without this worry.

While there is the question of paying premiums for more years when a policy is bought at a younger age, the type of policy purchased for young children is usually a whole life policy that offers other financial advantages. Such policies can accumulate “cash value” and receive policy dividends, which are generally able to accumulate tax-sheltered inside the life insurance policy. Dividends are normally used to buy more insurance over time and can increase the cash value. When a whole life insurance policy has decades to accumulate, the cash value and insurance coverage provided can grow to a substantial amount.

The cash value in a policy can be accessed for future goals,* such as:

  • Post-secondary education
  • A down payment on a home
  • Starting or buying a business
  • Unexpected healthcare or medical costs
  • An additional source of retirement income

Since you are the initial policy owner, you can help to guide and educate the next generation on the value of financial assets such as life insurance and help to prevent mistakes that are often made by inexperience. When you decide that they are financially responsible, you can transfer the policy (including its cash value) to your child or grandchild without income tax implications. Grandparents can also transfer policy ownership to the child’s parent to allow for ongoing guidance until a later date. 

As many families have unique circumstances and individual concerns vary, we work closely with our clients to ensure the structure of any insurance policy purchased for your children or grandchildren will be a welcome benefit and a valuable asset to them and/or the generations that follow.

You want your children and grandchildren to dream big and accomplish their goals. The purchase of a life insurance policy for a child can be a timely, lifelong gift to create a strong, resilient foundation for their dreams. For more information, please contact us through your Odlum Brown Investment Advisor or Portfolio Manager.

*Tax implications vary depending on how the cash value is accessed.

Odlum Brown Financial Services Limited (OBFSL), a wholly owned subsidiary of Odlum Brown Limited, can offer Odlum Brown clients a variety of coverage options from many of Canada’s top insurance companies tailored to suit their individual needs. Our licensed professionals are here to help you assess your position and then implement customized recommendations to meet your individual circumstances and needs.