Typically we think of life insurance as something needed for older individuals. As breadwinners, caregivers, and providers, we like to provide for the unfortunate occasions when an individual can no longer provide for his or her family. However, life insurance is available even for the very young. Is it worth it? What does it cover? And should you consider buying it?
Planning for Loss
Life insurance is protection against loss should the unthinkable occur. The last thing parents want to think about is losing their child. Unfortunately, it does happen, and the costs are always unexpected. Life insurance can cover funeral and burial costs, often the last things a parent wants to prepare for when welcoming a new life into the world. Further, if a child develops conditions that would affect insurability, by locking in a life insurance rate early, parents can circumvent the difficulties of acquiring higher risk insurance in the future.
Protection for Life
What’s unique about life insurance for babies though is that it allows you to lock in a low life insurance premium for the duration of the child’s life. By beginning early and maintaining coverage, parents can help lay the groundwork for a child’s adult financial security. When the child turns 21, ownership of the policy transfers seamlessly to the now adult, and still retains the low premiums their forward-thinking parents locked in.
Added Cash Value
As an added benefit, most baby life insurance plans accumulate a cash value that will gain interest over the lifetime of your child. It acts as an additional savings plan against which you or your child can borrow in the future. You can help pay for college, help the family through future lean times, or simply accumulate interest until you need the extra money.
The Criticism Against Baby Life Insurance
Many financial analysts are critical about acquiring life insurance for those who provide little if any financial assets. They rightly point out that the costs of insuring children often outweigh the benefits they might receive. Also, while locking in a low cost may help if your child develops a condition that makes him or her a high insurance risk, the chances of this are so low as to almost mitigate the benefits won by paying for insurance.
Parents better serve their and their childrens’ interests better by investing in quality health insurance and savings accounts. Using the same money that would go toward a life insurance premium can go into a 401k investment plan or even just federally guaranteed savings bonds. If you insist on buying life insurance, go with a term life insurance plan rather than a whole life insurance plan and invest the difference in savings or supplementing your own insurance. After all, chances are greater that something will happen to you rather than your child.
Having a baby can be a stressful and overwhelming time for a new parent. Too many people are willing to prey on the anxieties of nervous parents and their tendency to worry about the worst possible outcomes. Life insurance for babies, though, is rarely worth the cost for those who cannot afford it – but can be a great investment for those who can.