Protecting children from financial stress after a parent’s death

Protecting Children from Financial Stress After a Parent’s Death

Losing a parent is one of the most difficult experiences a child and family can face. While no financial plan can remove the emotional pain of losing someone you love, planning can help reduce some of the financial stress that may follow.

For families, life insurance can be one tool used to help protect a child’s financial future when a parent passes away.

The Financial Impact Can Be Bigger Than Expected

When a parent dies, the family may suddenly lose part or all of an income that helped pay for everyday expenses. The mortgage, rent, groceries, utilities, vehicle payments, childcare, debts and other household costs don’t necessarily stop.

There can also be additional expenses, including funeral costs and future education expenses.

A life insurance death benefit can provide a lump-sum payment to beneficiaries and may be used to help replace lost income, cover debts and expenses, or contribute toward a child’s education.

The goal isn’t necessarily to leave children a large amount of money. It is about helping make sure that the family has financial resources available during a very difficult period.

Protecting Their Everyday Life

For parents, one important question is:

“If something happened to me tomorrow, could my family maintain their current lifestyle?”

Children still need a home, food, clothing, transportation and support. They may also have activities, childcare and education costs.

Having appropriate life insurance coverage can help give the surviving parent or other responsible family member more financial flexibility. Instead of immediately worrying about how every bill will be paid, they may have resources available to help manage the family’s changing financial situation.

Planning for Education

Many parents want to help their children pursue college, university or another form of post-secondary education.

A parent’s death shouldn’t automatically mean those plans have to disappear.

Life insurance proceeds can potentially be used to help fund a child’s education after a parent’s death.

When considering coverage, parents may therefore want to think beyond today’s expenses and consider some of the financial goals they hope to support in the future.

Don’t Forget About Beneficiaries

Choosing the right beneficiary is an important part of life insurance planning.

If a child is under the age of majority, there can be additional considerations regarding how a death benefit is received and managed. The Government of Canada notes that parents may want to establish a trust and designate a trustee or administrator when naming a minor beneficiary. Provincial rules can also affect how these arrangements work.

This is one reason it’s important to review your beneficiary designations and discuss your specific situation with the appropriate insurance, legal or financial professional.

Start With What Makes Sense for Your Family

Life insurance doesn’t have to be complicated.

The amount of coverage a family needs depends on factors such as income, debts, mortgage obligations, existing coverage, number of children and long-term financial goals.

You don’t have to figure everything out alone. At Bathurst Life Insurance Inc., we help families in New Brunswick and Nova Scotia compare available life insurance options and understand their choices in simple terms.

The goal is to find protection that fits your needs and budget without pressure and without unnecessary jargon.

Simple Steps to Get Started

•Add up your family’s monthly costs. Mortgage or rent, food, childcare, vehicles, debts and activities.

•Think about the future. Education goals and how many years of support your children may need.

•Check what you already have. Review any group or personal coverage and know what happens if you change jobs.

•Review your beneficiaries. Especially if your children are under the age of majority.

•Talk to a licensed broker. A short, no-pressure conversation can bring a lot of clarity.

Planning ahead isn’t about expecting the worst. It’s about giving your family more financial options if the unexpected happens.

This article is for general educational purposes only and does not constitute legal, tax, or financial advice. Coverage needs, beneficiary rules and trust arrangements vary by province and personal situation. Please consult a licensed insurance broker and, where appropriate, a legal or financial professional.