Are Whole Life Policies For Kids A Good Idea? (Canada)

Why on earth would I want to get whole life insurance policies on my kids? Is even getting a life insurance policy on a kid or a child a good idea? These are questions we get asked and we are going to answer those questions. In fact, we're going to answer eight of them in this video. So stay tuned. Make sure you hit the subscribe button. Leave a comment below as we go through. Why on earth you would want to own an insurance policy on a child? So first question we get is what is the best age to start? So if you're considering doing this, you're looking at putting a policy in place really for anybody. But specifically on children is when is the best age to start? Well, you've probably heard the old saying that when's the best time to plant a tree? Well, 20 years ago, but the second best time is today. So consider that same mentality when you think about getting an insurance policy on anyone, especially a child. For myself personally as a parent, I have two kids. I was able to get policies initiated and submit the applications for them early as 16 days of age. And I have policies at a very early age for my kids. And I'm very proud about that for a number of reasons. I'll cover some of those in our video today. So the next question really is what is the minimum age that you can get an insurance policy set up for children? And it is exactly that, in Canada at least. Anyway, it's 16 days of age. That's the earliest that you can initiate the life insurance application and get it sent into the life company. There's some specific questions on there that they may have. Now, if you're also looking to apply for a critical ill illness or potentially a critical illness rider that may exist to go hand in hand with the insurance contract. And so it's, you know, kind of combined together. Then typically an insurance company is going to wait 31 days. So you could submit the app, but they're not going to issue anything or they may have some additional follow up questions after the 31st day. And that has to do with, you know, some of the complications that can exist when a newborn comes and joins us in the world. So there you go. That's the earliest that you can get an insurance policy on a child. So question number three. Does age impact the policy? Well, the answer is yes, age can have an impact to the policy, but not necessarily in the way that you think. Our brains typically have been attuned to think about insurance in general. Car insurance, travel insurance, different kinds of insurance. You know, as a Premium outlay and a cost. And so there's an impact on a whole life policy when there's a difference in age, but the real impact is in the total death benefit that you end up with. So the reality is, as far as accumulation of cash is concerned, there's really not a huge impact. However, when we think about age, we also have to think about the relevance in time. So if you were to think about the final year, whatever the final year you're going to be on planet Earth is, you don't know, I don't know. But let's just make an assumption that it's, I'll pick age 90. So if I'm age 90 and that's, you know, I kicked the bucket, I'm no longer around, that's my final year on planet Earth. Well, if I would have started an insurance policy when I was age 0 versus at age 1, well, that means the equivalent is I would have cut off the last year. So if I started the policy at age one and I died at 90, well, I only had 89 years of policy accumulation. But if I started at zero and I died at 90, I had 90 full years. So the year that you lose isn't the first year. It's actually the year on the back end, which is always the biggest year. It's the biggest year of growth and cash value in the policy, and it's the biggest year of accumulation of death benefit, typically. And so you're directly impacting what is possible to be achieved for the next generation and even for your own income potential by not getting started early or as early as you can. Now, in the insurance industry, we're able to often back data policy. And people have possibly heard of this idea of backdating before. With backdating, generally speaking, you can go six months back. Now, what does that mean? Well, the insurance company rounds up. So as an example, my birthday is in August. And so I have a lot of policies that I've started where the anniversary date, where the policy technically started, is in February, which is six months back from August. So the reason that that's happened, if I'm cruising forward in time and let's say it's June and I submit an application because my birthday's in August, I'm effectively the age that I will be in August, I'm pretty close to my birthday, which means that's really the age that I am. So the insurance company is assessing what your insurance age is, not what the age is on your driver's license. All right, so they'll round up as they get closer and closer to your birthday, you're actually considered the age that you'll become at your birthday. So back dating allows you to save age, which is very important. And it works really effectively for insurance contracts in a number of ways, especially participating whole life, because it also means that you're closer to the dividend that you will first receive in that first year and you're gaining that back end year of life, which is the biggest year. So backdating is a good example. All right, our next question. If you have a policy on a child, can you transfer the ownership of the policy later to the child when they're old enough, when they're old enough to pay the premiums themselves? Or maybe in your situation, when they're old enough that they've demonstrated to you that they're actually going to look after it? So the answer is yes. So I'll use myself as an example. Again, I have a policy. I own the policy on my son and my daughter. And so when they're old enough, first of all, when they're age 18, I could transfer the policy to them if I wanted to. However, as a parent, I'm not likely to do that. Now, some parents might, but for me, I'm not likely to do that until I have demonstrated that both of those children understand what they're receiving and they're going to be a good steward of it. In other words, are they going to keep paying the premiums? Are they going to keep that thing that I've built for them, my wife and I've built for them alive, and keep growing it and accumulating so that it can help them in their retirement, it can help them finance every car purchase they're going to make, help them with the down payment on home, do all the things in life that we're going to spend money on, and they're going to use that tool effectively. If they haven't demonstrated to me that they're able to do that, I'm the owner, I don't have to transfer it to them. I get to keep it. But that leads us to our next question, which is what happens if the owner dies? So if I own policies on my children today, and again, Richard will take Richard out. He's no longer with us. He gets hit by a city bus or something. I don't live in a city where there's many buses, so I don't think it's very likely. What would happen now? Who owns those policies? Well, when you complete the insurance application, you're also asked Is there going to be a contingent owner? So in my situation, because I'm owning the policy on someone that's not me, it's on my children. I'm the owner, they're the bodies. Then if something happens to me, we want to know who's going to take over the ownership. So in my situation, I have that as my wife. My wife will become the contingent owner and she will look after the policies until the kids are of age. Now, if something happens to both my wife and I, then the policies would fall to the kids. And if the kids aren't old enough yet, then they would be looked after basically by whoever we've elected as the trustee for the kids until they do become of age, and then they would take over the policy at that point. So the beautiful thing about owning policies in the family line on other people in the family, so children and grandchildren, is that it's a very efficient way to hold wealth, maintain it, control it, and transfer it down the family line with very minimal tax, very little tax consequences. In fact, generally speaking, none. When you're working within the family tree, the direct family line, there's a lot of benefits available there. Now, I want to take that one step further about the children. So let's assume that, you know, someone was older than myself and they had adult children. Can you get a policy on adult children? The answer is yes. Now, there might be a little bit more legwork in verifying what's the insurable interest there. There's an automated insurable interest just because they're children. But depending on where the ages are at, they also may want to understand, okay, this child's got their own life, they're now married, they've got their own children. What's the financial connection? In other words, what's the loss as a parent you'll receive directly in the event that something happens to this child who's now an adult and has their own income. So we have to draw connections there. Often joint property ownership is a good way to do that.

There could be a number of reasons, like maybe you would be the one looking after their children, your grandchildren, in the event something happened to them. So there's many ways to kind of tie that together. But again, for the most part, there's. There's generally no issues getting a policy on children at any age of life. So a little bit more about contingent owner. I think that's something we should just tighten up and clarify a little bit. So a contingent owner is very important when you are owning an insurance contract on another person, that's another body. It's really important to consider who will take over ownership of that, because if you go as the owner, but that insured person is still alive, you really want to be mindful of making sure that that's clear. In the children case and grandchildren case, there's an automated transition that can happen to make sure that the child or grandchild eventually ends up with it. Next question is going to be really about family banking. So what if the kids agree initially that they're going to continue using the infinite banking concept? So let's make an assumption that the whole reason you set this up and you're doing this is because you've been watching our channel, you've been listening to our podcast, you know, Wealthfield, Bay street, and you're learning about the power of the infinite banking concept. You've read Nelson's book Becoming youg Own Banker. If you haven't, by the way, click a link down below in the description. You can get a copy in your hands. And so you want to embrace that. And you're loving the concept. You're loving what it's doing for you. It's embracing a whole new financially energizing way of life. You're controlling capital, it's growing for you in a very tax efficient environment. And so now you pass away or you want to pass the policy on to the kids and you've been trying to teach them about this and maybe they haven't been catching on or gravitating to it. What if they say they're going to do that and then after you pass away and they end up with the policy anyhow, the kids just cancel the policy, they close it out, they take all the money, they deplete it all down, or they collapse the system that you've built. What do you do in that situation? Well, the reality is if you're dead, there's really nothing you can do. So the key is in making sure you instill good family conversations. Maybe you consider having an annual family banking meeting. Now we're going to have some more training on that. You may be able to find some videos on it. But consider having an annual family banking meeting where you can talk through how to manage that wealth long term and the, the vision that you have for it and your family. So that'll go a long way, having regular conversations about what family banking is. And then additionally, in your will, you can specify your final wishes. That's part of what a will is. It's your legal final wishes. And so if you haven't done a will. We have again some recommendations on doing that as well in some of our content. Make sure you go get one established. Do it in your jurisdiction, because depending on what jurisdiction you reside, the rules could be a little different. But it's important to have a will and you may want to have a clause or a very specified thing in your will about what you want to see happen when you pass away specific to insurance contracts. As an example, you might put something to the effect of upon my passing, any death benefit proceeds that are received, I want to first have the family use that to eliminate this debt. This debt. This debt. The remaining amount I want to be utilized to fund a minimum of 10 or 15 years of high cash value whole life insurance premiums, preferably on these people. You know, you can list, you know, spouse and you know, child, child, child and any grandchildren. This can be done through an annuity with the insurance company. You could write down a very clear and concise your legal final wish in relation to how you want that money utilized. Going to the last question on the list is kind of how I started this video. Why on earth would I want to get life insurance or a life insurance policy on a child? Now, whether it's a whole life policy or anything else, why would you want to do it? I think the answer is actually quite clear. But a lot of people aren't willing to think about, you know, worst case scenarios. And so as a parent, you know, we, we do everything we can for our children in all areas of life. We want them to be, you know, confident and we want them to aspire to do great things and we want to help them reach their dreams and their potential, learn how to walk, learn how to do all these kinds of things. And sometimes life comes up and things don't work out the way we intend. And it's very possible that you could lose a child or I'm sure you know, people in your life and you can reach out to people who've experienced that or they know people maybe through your church or people through work that have experienced that. And no parent wants to go through that, of course, but when it does happen, it's going to have a massive financial impact to your life because you're going to want to take time off, time off work, time off your business. You're going to want to process, you're going to want to grieve, you're going to want to spend time with family, you're going to want to possibly seek counseling. I would encourage people to do that and you want to make sure that, you know, you may even want to have a legacy fund created. You know, we've had experiences where that sort of thing has happened to a client. And what they've done with some of the proceeds is they've set up a little miniature scholarship fund for that child's friends in school for them to be able to apply for, to help fund some college education for them. So there's a lot of things that you can do to honor the memory and to continue a legacy now for that child that's no longer with us. So that's one absolutely good reason, really important reason to consider is if you're going to do that anyway, why not get an efficient policy? And you know, again, we have other content that talks about some of the advantages of participating dividend paying whole life. But if you get one of these on a child, it's in constant motion. It'll grow and accumulate for the rest of that child's life, your life and their life. If you want to control it, you can use that to help fund some of the things you're going to be spending on your child's life anyway. You need to, you know, take care of birthday parties, you know, every once in a while you might rent a bouncy house or you know, there's, there's, there's all these events you're gonna want to go on family vacations, your, you know, your child's first car. All of these kinds of things can stem from this policy. If you, if you understand what to do and if, then you use that as a teaching tool, a teaching mechanism for your children. The, the amount of opportunity that it creates for them over their lifespan is a monstrous amount because they will have learned skills using that tool. And that's really what makes things stick. So there's tons of reasons to have a policy, a critical illness policy or a life insurance policy, specifically a participating dividend paying whole life policy. Well designed, high cash value. And you know, consider getting a copy of Nelson's book Becoming youg Own Banker. He has some great examples in there. There's a chapter called An Even Distribution of Age Classes near the end of the book. And he walks through grandparents and parents getting policies on children and, and what a powerful, powerful way it is to operate financially when you do this. So make sure if you don't yet have your children insured, you can solve that problem very easily. Contact an authorized infinite banking practitioner, let them know that you've read Nelson's book. Let them know that you want to embrace this concept and you want to make sure that your children are set up for life and that you can mutually benefit as a family as you move forward through time. Check out some more of the great content. Make sure you get a copy of the book, subscribe to the channel and subscribe and leave a comment. Let us know if you've got insurance on your child, some of the reasons you chose to do it, and what have you been able to use that for in their life, and what's your vision for their life?