Grandparents Insuring Their Grandchildren

We all know how much grandparents love their grandchildren. It’s as if grandchildren are the younger versions of their mothers and fathers. Grandparents love their grandchildren, and they absolutely love being able to care for them. A number of grandparents are considering the financial futures of their grandchildren. This is especially the case if the parents are not in the best financial situation. A number of grandparents have considered obtaining life insurance for a grandchild in order to make sure that their grandchildren are thoroughly protected financially. While life insurance for a grandchild is nothing new, the concept of grandparents taking out life insurance policies on their grandchildren may be something that more individuals will consider. With many grandparents in their senior years, a number of them may have the resources to assist their grandchildren. For those grandparents that want to leave behind something for their grandchildren’s future, obtaining life insurance for a grandchild seems like a very good option.

What is Grandchild Insurance?

Life insurance for a grandchild is something that is not mentioned as much as other life insurance options. However, this type of life insurance is readily available for any grandparent that is interested in investing in their grandchildren’s future. Life insurance for a grandchild can be purchased from a major life insurance company. There are some stipulations for this type of insurance. Usually, there is an age limit to which the life insurance policy applies. These particular life insurance policies usually allow for coverage to begin several weeks to a few months after birth up to age 21 and in some cases 25. The life insurance for a grandchild must be purchased during these ages to ensure coverage. The reason that so many insurance providers promote life insurance for a grandchild is that grandparents can help build their grandchildren’s financial futures. Likewise, grandparents can obtain low rates on premiums for life insurance for their grandchildren. In many circumstances, this type of insurance is usually a lot easier to obtain than other insurance products. With life insurance for a grandchild, there is usually is not a health exam required and the premiums are so low that it is actually advantageous for grandparents to consider assisting their grandchildren’s financial future.

Why Many Grandparents Want to Insure Their Children?

There are a number of reasons why many grandparents want to apply for life insurance for a grandchild. As is the case, many grandparents see themselves as second parents to their grandchildren. Oftentimes grandparents are found buying gifts and providing financial support to on a consistent basis. This is especially case if the mother and father are not in the best financial situation. Circumstances such are the reason why life insurance for a grandchild is another reason why some grandparents choose to obtain this type of coverage. Even if the mother and father are not able to properly care for the grandchild after the grandparents’ demise, the child will still have a base of financial security. Life insurance for a grandchild is an excellent way for grandparents to give their grandchildren a head start in life. The money that is set aside in the insurance policy will grow over time and in some cases the grandchildren will be able to borrow against the money if so desired. These are just some of the many reasons why grandparents want to obtain life insurance for a grandchild.

What Are the Benefits of Grandchild Insurance?

Whenever life insurance for children is mentioned, there are a number of people that are somewhat on the fence about its value. Some people wonder why should anyone take out life insurance for a grandchild? This is a very good question because it really gets people thinking about all the things that could happen that would put a child’s financial future in jeopardy. The whole purpose of life insurance for a grandchild is to allow grandparents to make sure that their grandchildren’s future is secure. This type of life insurance provides benefits over the course of a child’s entire life. This is incredibly beneficial as most people usually have to buy their own life insurance when they are older. Also, life insurance for a grandchild is a benefit because it allows the money to accrue and eventually the child is able to borrow against the money if so desired. This is a benefit for any child that may want to obtain money for educational purposes. Likewise, if at some point the child wants to obtain additional coverage, they can do so and usually there is no health exam required. All these examples are reasons why many grandparents choose to obtain life insurance for a grandchild.

Thus, one of the best gifts that grandparents can give to their grandchildren is a life insurance policy for a grandchild. It is one of the best ways to ensure that grandchildren are financially secure in the future.

Preserve your wealth

A strategy to protect the value of your legacy

Photo of a baby holding adults hand

A permanent life insurance policy can provide your beneficiaries with the funds necessary to pay taxes owing upon your death.

The Preserve your wealth strategy is designed for individuals who:

  • Have built-up significant wealth in capital assets
  • Have a second property that has appreciated in value
  • Want to keep a vacation home in the family
  • Are worried about leaving their family with a large tax burden
  • Want to leave their full estate to heirs or favourite charity
  • Want to provide funding for final expenses, outstanding debts, legal fees and taxes

The situation

You have worked hard to achieve a degree of financial success. As each year passes and you become financially independent, you may think your need for life insurance decreases. However, the largest burden on your estate can be the taxes owing on assets upon your death. This may force the sale of some or all assets, perhaps below fair market value, in order to pay the tax. The family may be forced to sell a cottage or vacation property to pay the taxes owing on its increase in value. This can potentially reduce the legacy you will leave to your heirs or favourite charity. Would you like to know how to preserve your wealth to ensure the full value of your estate is received by your heirs or favourite charity?

The strategy

A permanent life insurance policy can provide your beneficiaries with the funds necessary to pay taxes owing upon your death. Life insurance can be a cost-effective strategy to provide funds exactly when they are needed. A tax-advantaged permanent life insurance policy allows for the accumulation of cash values inside the policy, within certain legislative limits and without paying income tax on growth. The death benefit is paid to your beneficiaries tax-free upon your death. With a named beneficiary other than the estate, you can eliminate probate fees on the death benefit (not applicable in Quebec). The Preserve your wealth strategy should be reviewed with your tax advisor and accountant to ensure the strategy is appropriate based on your needs.

The Preserve your wealth strategy offers:

  • Permanent life insurance protection and client control of capital in a tax-advantaged insurance policy
  • Potential for tax-advantaged accumulation that transfers tax-free to beneficiaries upon your death
  • Funding to offset anticipated tax liability
  • Flexibility to change the policy beneficiary, and coverage amount (subject to any underwriting requirements)
  • The elimination of probate fees at death with a named beneficiary other than the estate (not applicable in Quebec) For more information about this and other estate planning material, contact your financial advisor!

All comments related to taxation are general in nature and are based on Canadian tax legislation, which is subject to change, and apply to Canadian residents. For the implications as they relate to individual circumstances, consult the appropriate legal, accounting or tax expert.

Which Type Of Life Insurance Is Best For You?

In regards to life insurance there are two basic types, one being term and the other permanent. Term insurance provides life insurance for the amount of time that the policy holder specifies. If the insured dies within the specified time, the face value of the policy will be given to the beneficiary, however if he does not die within that time span and the policy is not renewed, then nothing will be paid out. Permanent life insurance on the other hand, provides insurance protection for the policy holder’s life span, as well as a savings element. There are two common types of permanent insurance: whole life insurance and universal life insurance.

Permanent is more expensive to own than term insurance, however, you should let your family’s need be the determining factor in deciding which type of insurance is best for you, rather than the price.

You have probably heard arguments about how term policies are the better deal or marketing hype regarding cash value policies, but what it really comes down to is each person’s individual situation.