• Wed, Mar 18 2009

Is Baby Life Insurance Necessary?

In a word – NO.

In many more words, here’s the problem with baby life insurance…

According to Smart Money and Consumer Reports life insurance for a newborn makes little to no financial sense unless your little one happens to be the sole bread winner in the family. Obviously this is rare unless your tot is big time Hollywood, so skip that insurance.

do you need baby life insurance?

In the Smart Money piece, an actuary with the consumer advocacy group Consumer Federation of America, notes that baby life insurance is not only unnecessary but that, “It’s never a good idea.“

Why you don’t need baby life insurance:

The main reason you don’t need baby insurance is because your money is more useful when spent in other ways. Better things to spend your cash on includes issues like a 401k, college funds, retirement funds, or even basics like groceries or savings.

Your insurance and your partner’s insurance is far more important than baby insurance. Life insurance only does one thing, it protects and provides for those left behind when someone dies. As noted above, unless your child is making bank for the family somehow, you don’t need the protection if your child dies.

Some parents think, “I should get that insurance, in case my child can’t get any later” however, it’s extremely rare that a young adult would be turned down for life insurance.

It is tempting…

When my son Cedar was about six years old he told me this; “For my own personal security and smart peas of mind (yes he did say peas) I should have life insurance…. and bonus, it will double by the time I’m 21! CAN we get some?!” Um… if the insurance companies can sell something as non-flashy, non-toy-like, and boring to a six year old, then places like Gerber Life are doing a kick butt job advertising this stuff, but honestly you really don’t need to waste your money on it.

[image via stock.xchng]

What We're Reading:
Share This Post:
  • Sarah

    Hmmm…. I dont see a problem with getting a small policy that would cover the cost of incidentals in case of a death. (cover the cost of a funeral and time off work) – That way you dont have to take a huge financial hit on top of the huge emotional hit that a child’s death would obviously cause. No one likes to think about somethign like that happening, but I would file that under the “hope for the best, plan for the worst”. Money is the last thing you want to be worrying about in a time like that.

  • http://www.maviefolle.com sheila

    First, CUTE pic! Second..you are absolutely right. It’s not necessary. In fact, when my kids were born, we put them as a rider on my policy. It cost me only $18 a YEAR! Great coverage (just in case of course) and very reasonable.

  • Bri

    I am pregnant now with my first child and this is something that has come up. From what I’ve read it is rather difficult to obtain whole life insurance for an adult. The Gerber plan I was looking at would allow you to increase the premium at age 18 to up to like $30000 and be transferred to your child which they can use as life insurance at that point. There are other plans that would pay more, but this seems like it would be a good cost benefit for your child.

    Is there something I’m missing that would make this a poor choice? I understand the money you pay would be better left in a savings acct, but it seems that the peace of mind one would have (like the 1st commenter stated) if something bad were to happen might be worth it.

  • Julie

    Bri,
    I currently have this policy for my 2 yr old and plan on getting one for my baby that is due in a few days. I personally don’t see that it was a poor choice on my part. But, to each their own!

  • http://jenfreedom.blogspot.com/ Jennifer Chait

    Smart Money and Consumer Reports are leaders in budgeting and financial research so I’m inclined to believe them when they say that insurance is not necessary. Also, when you consider that very small amounts of cash, in say a 4O1K can multiple quickly http://cgi.money.cnn.com/tools/savingscalc/savingscalc.html – i.e. the sooner you start and the more you invest, the better the end return, it makes more sense to place any extra cash into a retirement fund. I know that lots of people feel these are a good choice for piece of mind, and so emotionally, if you need it, fine, but research shows it’s not a smart non-emotional money choice.

  • http://www.thriftymommy.com Karen Weideman

    I was listening to a financial advisor (I think it was Dave Ramsey) and he also stated that you didn’t need life insurance for a baby because they don’t contribute financially to the family. If you can find one for $20-30/year, it might be worth considering. I certainly wouldn’t put $20-30/month into a policy. That’s money better spent some place else.

  • Jen

    I also have the Gerber policy on each of my kids. We’re living paycheck to paycheck right now, so we wouldn’t be able to save the money, it would just get sucked up somewhere else but we know if something unimaginable happened we’d at least be able to afford a decent funeral. Besides, the kids 529 accounts are losing principal right now so I’m not inclined to invest in anything til the economy starts to improve.

  • http://www.lifeinsure.com The Life Insurer

    I totally agree with you on this. As an insurance agent, I often find myself recommending against baby life insurance. You’re right in that the money could be put to much better use.

  • Laura

    Although I agree if you have the money that if your child were to die you could cover funeral expenses, then yes put the $200 a year into a college fund.

    However, I am an insurance agent and I have purchased a product for my daughter and will for my son that is due in September. My daughters plan is a whole life plan that will have cash value by the time she is 25 that she would be able to take out and use how she wishes, whether it is for college or whatever she needs, it will be there. And at that time I will stop paying for the policy and it will be her time to insure herself.

    I honestly didn’t think it was necessary until a friend of mine had a death in her family and the cost of the funeral was over $10,000 for the child. I don’t know how many of us have $10,000 sitting in the bank anymore….

  • Pingback: Nesting: Don’t Buy Life Insurance for Your Baby - CBS MoneyWatch.com

  • Missing Point

    Insurance for children is so dirt cheap, like $2 a month. Like The Life Insurer said, it makes sense just because most of us don’t have $10,000 lying around in the tragic event something happened. Another point that you are missing…which is huge, insurance on your children protects their insurability when they become adults! If your child develops any kind of illness or condition, they will still be insurable because you as the parent had the foresight of protecting your children.

    Sometimes financial sense is not solely measured in dollars and cents.

  • http://www.gerberlife.com/gl/view/index.jsp whole life

    It’s commonly known that if there is demand – there will be supply. Life insurance policies for babies are available for sale because there are concerned parents who are looking for protection for their family.

  • mktg_god

    Unfortunately, Smart Money isn’t always smart. I am purchasing insurance for my newborn for a handful of reasons:
    1. Funerals are expensive.
    2. My wife was diagnosed with Juvenile Diabetes at age 7 – and contrary to the Smart Money article, she’s only able to get life insurance as part of an employee compensation package, which is a set amount.
    3. If my child dies, I know that I would be off work for a while and would also require counseling .
    4. By getting either a cash value plan or a return of premium plan, you are giving them guaranteed equity that they can use in the future. While you don’t generate interest on those funds I believe it’s worth it to know that in the event of a tragedy you won’t have to worry about money.

  • Gale

    In my opinion, it’s a lot smarter to insure the parents than the child because, while the loss of a child will have a tremendous impact emotionally, it will not have the same financial blow as if a parent passes away.

    Long Term Care Insurance Alabama

  • mike

    I put $30 a month in my childs savings account for college. I bought a one time premium whole life insurance policy for my child for about $712. Long story short after 6 years I have earned about $15 total interest in the savings account on about $2000 total invested with the savings account. The $712 I put in the life insurance is now worth about $880. I don’t like the idea of gambling my childs college tuition on the stock market or a college savings plan ran by the government .
    I am happy about the policy I took out on my son though I agree it is more important to insure myself to protect he and my wifes future.