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Whole life Insurance for myself and kids worth it? or better invest elsewhere?

11383 Views 28 Replies 13 Participants Last post by  ssimps
Hi guys,

I am 32 years old and just finished paying off my mortgage. I have no life insurance and not much in RRSPs yet, but have a good amount in savings account. I have 4 children and my dream would be to leave them with at least one million each. I would prefer to leave them this amount before I pass away so I can see them enjoy it, but I am not sure it will be possible.

I was looking into a Whole life Insurance policy for myself with a quick pay 10. So basically it would cost me $9.5k/year for 10 years and after that I would have protection all my life for a million dollars. I am trying to understand if this is worth it or if I could make more investing in something safe myself.

I was also thinking of starting a policy on each of my children which would roughly cost about $4k each per year for 10 years and then no more payments. This is also 1 million each, but will it be worth anything in 70 or 80 years when they die?

We are looking at about 24k/year in insurance policies for the next 10 years here accounting to 240k. I don't have a mortgage to pay anymore which makes it much easier to afford, but it is not a small amount either. I would have to tighten my belt a bit on other stuff, but if it would be worth it in the long run, then I would definately be prepared to do it. Obviously the insurance agent is going to try and sell me as much as he can, but I would love the feedback from the rest of you here that have setup something similar or thought of it and then decided not to.

Am I better off taking the 16k for the kids or 24k for all and investing it elsewhere. Can I end up with more money in the long run? Please keep in mind I want this to be a safe investment so I definately will not get 8% returns in my opinion, but let me know your thoughts/advice anyway.

Thank you.
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"Buy term & invest the difference" - sorry, couldn't resist but this might be actually applicable here?

I believe the purpose behind life insurance is to pay off debts and ensure income for the surviving family. You have no current debt but obviously future debt such as funeral, school for kids, and replacement income.

Being debt free @ 32, I assume you have high income/low expenses and thus I would suggest the following middle ground.

1. Buy Term life for XX years - the critical assumption is that this costs much less than Whole Life
2. Between now & then, continue to invest until you have a sizable net asset base that the family can survive without you for a period of time - this magicially works out to the period of XX years of course
3. Once XX years is complete, the Term Insurance expires, you have more savings than otherwise and you have the additional cash flow that had went to Term.

Of course if you can't save money, Whole Life would be better I think - but that's not you I assume.

I think the No-Life-Insurance-invest-instead is too risky. You just KNOW as soon as you plan to do this, something is going to happen. You'll be lucky to get a pine box then :))

[disclosure] My Life Insurance is through work so file this under 'thoughts', not 'advice'. Through work was cheap so it was an easy decision. When I get 'wacked' from work (no-one retires anymore from my industry), I don't plan to get Life Insurance as I think I have enough assets to cover my family if I die sooner than later. LTD/Critical care is another matter though and IS on my to-do list to investigate.
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cannon-fodder; you're right, where are my manners.
mcu - BIG kudos, years of risk & hard work have paid off, great accomplishment.

I think cannon fodder has a great idea. I believe life insurances passes through the estate tax free. Having the kids pay the premiums is a fairly common strategy, heck I recall tv commercials about it. ..Unsure what to call it, income splitting? cost sharing? generation financial planning :) There are lots of web pages around documenting this, no doubt CC has one, just can't find it
mcu - ideas that are well beyond the scope of an internet blog and are subject to somebody who knows what they are talking about....cue the sirens and alarm bells

purchase investments, tranfer to the kids, pay the gain or fmv tax, and pay the income that it attributed back to you until they are 18?

setup a Family Trust?

Incorporate your business (big assumption on my part), pay private corporation dividends, pay the "kiddie tax"
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