Life Insurance for New and Expecting Parents in Canada

Of course, we all want what’s best for our family, and the addition of a new family member means there’s many new things to consider. To future education, careers, and friends there’s so many things to look forward to in your child’s future. Of course, another important consideration when looking towards the future, is your family’s financial situation.

Life insurance can ensure the financial well-being of your family. By choosing to get a policy, you can be sure that in the event of an unexpected death, if your spouse is ever left to care for your child alone they will have the financial means to do so. While it’s hard to think of loss during such a joyful time, considering life insurance early can offer peace of mind in your family’s financial security so you can focus on what matters most.

In this article:

• Why Get Life Insurance as a New or Expecting Parent
• Types of Life Insurance
• Other Beneficial Policy Types
  • Child Life Insurance
  • Joint Last to Die / First to Die Life Insurance
  • Critical Illness and Disability Insurance
• Cost of Life Insurance for New and Expecting Parents
• Do Both Parents Need Life Insurance
• Life Insurance While Pregnant
• Life Insurance for Same-Sex Parents
• Life Insurance for Single Parents
• Frequently Asked Questions (FAQs) About Life Insurance for New and Expecting Parents

Why Get Life Insurance as a New or Expecting Parent

A life insurance policy is a contract where the insurer promises to pay a specific sum to the policy’s beneficiaries after the policyholder passes away, in exchange for monthly or annual premiums paid by the policyholder while the policy is active. Since new parents have many financial responsibilities including providing for dependents, managing debts, paying for a mortgage, and generating income for the family, life insurance can be a multifaceted tool in protecting your family after an unexpected death.

Here are a few ways life insurance can benefit new parents:

Types of life insurance

There are several types of life insurance policies that may be beneficial to new parents, which can be broken down into three main categories: term life insurance, permanent life insurance, and no medical life insurance. Here is a quick overview of the three policy options:

Other Beneficial Policy Types

While the three main policy types offer the most essential coverage, there are other types of policies that can benefit new and expecting parents. Oftentimes these can be purchased as a stand alone policy or added as a policy rider to an existing policy.

Child Life Insurance

Child life insurance is a life insurance policy that insures your child and provides coverage in the unfortunate event of their death. While it’s difficult to think about such a scenario, this type of insurance offers several benefits to both the parent and the child:

• Guaranteed Insurability: Purchasing life insurance for your child ensures they can maintain affordable life insurance coverage throughout their life, even if they were to develop any health issues later in life that could make life insurance more difficult to qualify for.
• Cash Value: Most child life insurance policies accumulate a cash value that grows at a fixed rate. Your child can borrow against or withdraw from this amount to cover future expenses such as education costs or first time home ownership.
• Financial Security: In the tragic event of a child’s death, this policy can help cover end-of life-expenses and other associated costs, providing financial relief during an emotionally challenging time.

Joint Last to Die / First to Die Life Insurance

Joint life insurance policies cover two lives under one policy and are typically used to cover spouses. Here is how each policy can be used to benefit your family:

• First to Die: This policy pays out the death benefit upon the death of the first insured person. It helps the surviving spouse manage immediate financial needs such as paying off debts, covering living expenses, or providing for dependents. This can be particularly useful for new and expecting parents who rely on each other’s income.
• Joint Last to Die: This policy pays out the death benefit only after both insured individuals have passed away. While it doesn’t provide immediate financial relief upon the death of the first spouse, it is often used for estate planning purposes, ensuring that children or other beneficiaries receive financial support. This can be beneficial for covering estate taxes, ensuring an inheritance, or funding trusts for children’s future needs.

Critical Illness and Disability Insurance

Critical illness and disability insurance are two separate policies that provide financial support if you are diagnosed with a serious illness or become disabled and unable to work. Here is how they can be used to benefit your family:

• Critical Illness Insurance: This policy pays out a lump sum if you are diagnosed with a specified critical illness such as cancer, heart attack, or stroke. This type of insurance can be used to cover medical expenses, pay for specialized treatments, or replace income lost during the recovery period.
• Disability Insurance: This policy pays out a lump sum if you become disabled and are unable to work. For parents, disability insurance is crucial as it helps cover ongoing living expenses, such as mortgage payments, utility bills, and daily necessities, allowing your family to maintain their standard of living even if your ability to earn an income is compromised.

Cost of Life Insurance for New and Expecting Parents

The cost of life insurance varies between insurance companies and specific policies, so how much life insurance will cost for you depends on the specific policy you choose. Life insurance costs are also affected by certain factors which can make premiums more expensive. These include:

• Age; the older you are the higher your rates.
• Gender; females tend to pay lower premiums on average due to having higher life expectancy.
• Criminal record; having a record will lead to higher premiums.
• Pre-existing medical conditions; the more severe your medical condition is, the higher your premiums.
• Occupation or Hobbies; if you have a hazardous occupation or participate in a dangerous hobby this can lead to higher premium rates.

The average age of new parents in Canada is 30 years old, meaning many new parents are young enough to enjoy affordable premiums. Take a look at the average rate for both 30 year old male and female non-smoking Canadians with $500,000 in coverage:

Do Both Parents Need Life Insurance

Whether or not both you and your spouse need life insurance, will depend on your financial situation, however it is almost always recommended for both spouses to be covered. Life insurance can be beneficial if both you and your spouse rely on each other’s income, as it can replace what you were expecting to receive if they were to pass away. It can also be used to ensure your partner is not left covering the cost of a mortgage you intended to help pay for.

Life insurance can also be beneficial for parents who don’t earn an income. There are many benefits of getting coverage as a stay-at-home parent as you still contribute to the household even if you aren’t earning an income. Life insurance can cover the cost of child care, household maintenance, and other responsibilities taken care of by a stay-at-home parent. It can also cover lost income from the surviving spouse as they spend more time covering household and child care responsibilities.

If you are interested in life insurance for you and your spouse, you can either get separate policies, or purchase joint life insurance that covers both of you under one policy. Separate policies are a better option for spouses who have vastly different incomes and need different coverage amounts and joint life insurance is better for spouses who need similar coverage and would like to take advantage of the affordability of this policy type.

Life Insurance While Pregnant

Having a medical condition can affect life insurance costs, and being affected by a pre-existing condition can increase life insurance premiums. While pregnancy is a temporary process, it can still affect life insurance costs, and the impact on life insurance premiums will vary depending on several factors. Here’s how pregnancy can influence life insurance:

Some insurers may have waiting periods for pregnant applicants, especially if there are complications. This means they might postpone the decision on the policy until after the baby is born and the mother’s health has stabilized. While you are able to apply for life insurance at any point during your pregnancy, here is the recommended times to do so:

Life Insurance for Same-Sex Parents

Life insurance can not discriminate against same-sex parents under federal law since same-sex marriage has been legal since 2005. This means that you and your partner are entitled to life insurance coverage regardless of your sexual orientation.

Life Insurance for Single Parents

Even if you are a single parent who is solely responsible for your child, you can still benefit from life insurance. In the event you were to pass away unexpectedly your child’s needs will still need to be met. This could mean listing a sibling, friend, parent, or any other trusted person as the beneficiary of your policy with the expectation they would use the money toward caring for your child. You could also list your child as the beneficiary of your policy, though it’s important to keep in mind that your child will not be able to access the life insurance payout until they are no longer a minor.

Frequently Asked Questions (FAQs) About Life Insurance for New and Expecting Parents

Find the Right Solution for You and Your Family

If you are interested in life insurance as a new or expecting parent but don’t know what coverage is right for your family, we can help. At Protect Your Wealth, we work directly with families to compare policies and provide quotes from the top life insurance companies in Canada. We are dedicated to ensuring you understand all your coverage options and finding the right policy for you and your family. We’ve been providing expert life insurance solutions since 2007 and have helped countless families get the financial protection they need.

Contact Protect Your Wealth or call us at 1-877-654-6119 for a free consultation with an expert advisor today! We’re proudly based out of Hamilton, and service clients anywhere in British Columbia, Ontario, Alberta, and Manitoba including areas such as Kitchener, Toronto, Kelowna and Calgary.