Why I chose to get insurance for my baby

Why I chose to insure my baby

When I first started in the insurance industry I shared the same view as my mentor: life insurance isn’t necessary on a child as there isn’t the same financial loss as when an adult breadwinner passes away. While this is true in one sense, I now disagree - even if you don’t rely on someone for an income, the impact of their premature death can have significant financial consequences. But I don't have insurance for that reason (that as a parent, you can't even think about) - I'm thinking about the future.

When my son was born, I registered him online: applying for his SIN, birth certificate and MSP (basic health insurance) as well as registering him for the work health and dental benefits plan. When he was 30 days old I completed the applications for his Life Insurance and Critical Illness (CI) Insurance. There are different reasons why parents choose to insure their child and both made sense to me:

1. If my child got sick or passed away before me, there will very likely be a financial impact

2. By getting coverage now, no matter what my child’s health in the future, he will at least have some basic life and CI insurance.

We’ve all read the stories about families who have kids at BC Children’s Hospital and the subsequent fundraisers, charity events and donation collections. Unfortunately, in many cases, the money that comes in from generous family, friends and strangers doesn’t cover the full cost of parents taking time off work, traveling to/from the mainland, staying in a hotel or renting an apartment, childcare for other children, modifying their home after the hospital stay, comfort items (like a special chair, toys, a trip) for the child, etc. If anything ever happened to my son (and no one likes thinking about this), I would do whatever necessary to help him get better. And going to work would be at the bottom of the priority list. Receiving cash after a Critical Illness diagnosis could be a gamechanger. In the terribly unlikely event of me outliving my son, again, taking the time I need away from an office is important. So is donating money to a charity on his behalf or setting up a scholarship, as examples.

The nicer way to think about children’s insurance is the ability to have it in place for the future.

Children's insurance policies can be fully paid for in 20 years, leaving them health and life insurance that NO ONE PAYS FOR for the rest of their life. Do I think there's a pretty good chance that over the next 90 years or so, my son may suffer a critical illness? Unfortunately, statistics aren't in his favour. Do I think there's a chance he will die one day? Sadly, yes, it's still 100% (unless someone figures out how to make us immortal).

No parent wants to think about this but those that plan for their children's future are giving them a great foundation.

Baby X arrived!

 SONY DSC

Baby X was born end of January. My husband and I are thrilled and can't wait to learn more as we join other parents on the journey of child-raising! -Alyx

A 15-week mat leave

One of the hot questions I get asked these days is about EI maternity leave for employees and how long I'll be off work. As a self-employed business owner, I've decided to take about 3 months off (then 3-4 months part-time). Having no income for the next many months will be tough but I chose self-employment specifically for the flexibility of being able to take time off and modify my hours for my family as it grows. Many Canadian woman are fortunate enough to take an entire year off from work to care for baby and find their routine while still receiving income and knowing their job is secure when they return to work. There are varying maternity leave benefits around the world and we are lucky compared to our neighbours down south who only get about 12 weeks leave and job security.

Canadian employees can apply for paid time off under the Employment Insurance (EI) program: 15 weeks for mom and 35 weeks for either mom or dad/other parent (or the 35 weeks can be shared between them). 55% of earnings is covered (up to $501/week or just over $25,000/year - taxable). Some employers even do a top-up (ex. 85% of usual earnings for the first 5 months). Remember that EI benefits are taxable and many parents find that there is tax owing the following year as not enough is withheld from the EI payments. Be sure to request additional tax be withheld or be prepared to either pay some tax or contribute to RSPs before the end of February the following year.

Employees

If your company has an HR department, this is the first place to start, as well as asking co-workers who have walked the parental path before you. If you are the trailblazer and work in a small business, calling Service Canada (1-800-206-7218) directly and being familiar with the basics online will help you coordinate with your employer. Discuss how long you plan to work - but be realistic that leaving  a month early may be financially unaffordable and working up until due date may be physically impossible. Note that there is up to 15 weeks sick leave available pre-due date if you're ordered to stop work for medical reasons (but you cannot plan to take this and must be under Doctor's orders) and that there is a 2-week waiting period. Benefits are also paid in arrears.

Sign up now for My Service Canada Account which allows you to track your benefits online.

Business Owners

A self-employed opt-in program for EI was introduced a couple years ago that allowed certain benefits to be claimed. However, there is a one-year waiting period and once you claim, you can never opt-out. I have not yet met a self-employed person who has registered. My personal opinion is that individual planning and insurance is preferable to relying on the small weekly EI benefit (ie. saving for the time off for maternity leave, having individual disability insurance in case of inability to work and emergency savings). The math works out if you did want to collect parental EI but the factors I considered were the increasing EI premiums, time value of money and the reality that most business owners wouldn't have a business to return to if they disappeared for a year.

The numbers:

Annual cost for the self-employed EI program: $891 ($1.88 on every $100 to max income of $47,400 in 2013)

Maternity leave maximum EI benefits (taxable): $7,515

Parental leave maximum: $17,535

Sickness/Disability leave: $7,515

Compassionate care leave: $3,000

You can do the math about how many of these benefits you may access vs. how long you expect to pay (once claimed, you must continue paying EI premiums when working again; many of us will be working into our 70s...do you still want to be paying EI premiums then?).

 Plan plan plan

Losing a significant amount of my income for half the year will absolutely be felt in our house. By preparing early and reviewing our budget often, we think we'll be ok. Setting our priorities and watching our spending habits closely in the last few months of pregnancy has given us an idea of how things may go. There are lots of helpful blogs and articles about what other families did in their pre-baby countdown and other helpful tips.

No matter what your situation, hopefully you can choose the time off you feel comfortable with, and can afford, to spend time with your newest bundle of joy!

 

* This information is for reference only and your tax/financial/legal situation should be discussed with your advisors