Best gift for grandson is some life insurance
Renewable policy will either help the child, or the family down the road
I’m a new grandmother: My 22-yearold son and his girlfriend just had a baby boy. They both work but don’t make much money and she’s on maternity leave. I’ve helped them out with rent and groceries, baby supplies like his crib, stroller, change table and car seat. I still work full time and I’d like to set aside some money for my grandson, just in case something happens to me. Do you have any ideas?
Congratulations, grandma, on your bouncing grandbaby! I’m thrilled for you.
There are many ways to set aside funds for future generations. Because you are older than your son and (I suspect) his girlfriend, the risk of you not being around to help is higher than the risk of either of them dying. But I think the greater danger to this young family is if either the mom or dad, or — God forbid — both of them were to die pre-maturely. That would be a disaster.
I can just imagine, in that dreadful situation, that you would want to participate even more than you do now. The easiest and most cost-effective way to plan for this unlikely but possible situation is with the use of a life insurance policy on your son’s life and his girlfriend’s life. Of course, money does not replace a parent, but it sure would assist in that potentially disastrous circumstance.
You’ll need the co-operation of your son, and his girlfriend, to make this happen.
Let’s assume that they are both 22 years old, in good health and nonsmokers. To purchase a $500,000 life insurance policy on your son, with a 20-year term, you’d pay approximately $34 per month. A similar $500,000 policy on your grandson’s mother is around $24 per month. For a total cost of about $58 each month, you could cover the less-than-likely financial risk that a death could occur in that family. (The cost would increase if they use tobacco, nicotine or cannabis products or are in less optimal health compared with the
average male and female of their age.)
The term part of this life insurance policy means the price — called a premium — stays the same for a specific period of time, or term. I’m suggesting a 20-year term, because that gets the little one to 20 years of age.
If an untimely death occurs in that family, you would show up with a cheque for $500,000. Those funds are paid tax-free, so that whole amount is available to assist the surviving parent and their son into the future. There’s no limit on what the funds could be used for.
The insurance policies should also be renewable. This means that after the initial 20-year term, the insurance doesn’t expire, but automatically renews for another 20-year term, without the requirement of any new medical information being provided. After that first 20-year timeframe, there will be a new — and higher — premium for the next 20 years, because the risk of dying has increased.
At renewal, the family’s situation should also be re-evaluated to determine if that same $500,000 of life insurance is still appropriate. If the couple has no debts and a death would not negatively affect the surviving spouse, then less coverage may be required, at a lower cost. On the other hand, maybe the couple has a mortgage at that point, went on to expand the family and still has a bunch of kids at home. In that case, the full amount of insurance coverage ought to be carried forward into the next 20-year term.
Assuming your son and his girlfriend agree to participate, they would need to complete a life insurance application and answer some medical history questions with a qualified life insurance agent. They may have to visit with a paramedical to provide some additional information, such as blood pressure and blood or urine samples. An APS (attending physician statement) will also be requested from their family doctor.
The, process should take about four to six weeks to be approved and implemented. The monthly premiums would come directly from your bank account. And, in the future, if the new parents are in a better financial situation, they could take over the premium payments themselves.
Two 20-year term life insurance policies with a renewable option just might be the greatest gift you could give this young family.