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This content is for informational purposes only and is not intended to provide legal advice.
People don’t like to think about life insurance because they don’t want to deal with the reality of death. This avoidance is especially true of new parents and thinking about life insurance for their beautifully healthy baby.
But buying life insurance is never cheaper than when you purchase it for an infant, and there are several reasons life insurance for babies is a good idea. Some insurance companies are better than others, so read on to learn about the best plans and companies to get a life insurance quote for your child to help inform your choice.
Life Insurance for Babies
Babies present such a low risk to insurance companies that they’re eligible for the lowest premiums of any age group, so if you’re thinking about getting a life insurance policy for your children or future children, the best time to get it is in the first year of their lives.
What is life insurance?
Life insurance is a financial product where you pay a premium to receive a potential benefit. With a term life insurance policy, you pay premiums for a set term, usually 20 or 30 years. If you die during that time, your beneficiaries will receive your death benefit.
A term policy is best for individuals with dependents and debt, like a mortgage. When you apply for a mortgage, you have more to think about than just your current financial situation. You also need to consider how your family would keep the house if they lost your income. So, as a parent, you should prioritize your life insurance even before you establish a policy for your child.
The other main category of life insurance is whole life insurance. This kind of policy doesn’t expire as long as you continue paying your premiums. It also builds a cash value that you can borrow from or use for premium payments.
What kind of policy can you buy for an infant?
Infants do not need term life insurance because they don’t have debt or dependents. However, term life insurance is ideal for parents because you can purchase a much more significant benefit for a lower price than you could with whole life insurance.
Policies geared toward children and babies are whole life policies. Once your child becomes an adult, usually age 21, they become owners of the policy. You can continue making payments or pass the responsibility on to them.
You can even purchase term life insurance policies very inexpensively for children. Just remember that there is no benefit available past the term like there is with a whole life insurance policy.
Some life insurance plans can even serve the same purpose as savings account for college. There are many different options for life insurance, depending on the provider.
Some policies are geared toward funeral expenses, while others have much higher benefits.
What are the benefits of life insurance for children?
The most significant benefit is insurability. But, as we’ll discuss next, there are investment alternatives that yield higher returns than a life insurance policy. So, having life insurance as an investment isn’t the best reason to get a policy.
But, if your child becomes uninsurable, they’ll still be able to keep their life insurance policy you first got when they were born. The following are some of the reasons a person may become uninsurable:
- Certain types of cancer
- Diabetes
- Heart disease
- Obesity
- Stroke
If you have a family history of any of the above, the case for buying a policy for lifelong insurance is even stronger.
Babies don’t need to go through medical exams to get a policy. You may need to answer a couple of questions to qualify, but you won’t have to take your baby to an extra appointment or have someone come and do an examination.
Are there alternatives to life insurance for babies?
There are alternatives to life insurance for babies.
A 529 college savings plan will help you grow your investment far more quickly than a life insurance policy. In fact, money put into a 529 plan will double in value before a whole life insurance plan builds up enough cash value to even equal your investment.
Many term policies and employer-sponsored life insurance policies give policyholders a chance to add riders for children. These riders typically provide enough benefit for funeral expenses. Sometimes riders are free, especially with employer-sponsored plans, but even some independent life insurance policies offer rates as low as $5 a year.
Another alternative is a custodial account where parents can work with their children to choose investments. This option can be an excellent one to teach practical investment strategies to your children. The teaching opportunities involved make it highly popular for parents committed to raising financially savvy children.
Best Insurance Providers for Children
Most people have heard of Gerber Grow-Up Plan. Gerber is good at advertising and offers affordable plans that work for many families. It also has a college savings life insurance plan that you can use in conjunction with college scholarships and other savings.
Mutual of Omaha is another provider with infant plans that work for many families. However, their policies only go up to $50,000.
Finally, American Family has developed an excellent whole life insurance policy option for children.
Do babies need life insurance?
Babies don’t need life insurance. However, it’s wise to consider the option. Life insurance policies are protected from taxes, so a life insurance policy is a great place to put money if you’re carefully allocating money for tax benefits.
You should check with your life insurance provider to see if you have the option to add a rider to your policy for your children. It may be more cost-effective than purchasing a stand-alone policy for your child, especially considering that other investment options make more financial sense than a life insurance policy.
Another reason a life insurance policy is a good idea is that it allows you to put money aside monthly for your child, which can be easier to do than disciplining yourself to invest money monthly or come up with a significant initial investment.
Life insurance for babies makes a lot of sense to many families, but it’s not the only reasonable option available. Parents should discuss their goals and budgets with a financial advisor to help them decide what will work best for their situation.
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Melanie Musson writes and researches for the insurance comparison site, ExpertInsuranceReviews.com. She’s passionate about helping people understand their life insurance needs and how the right policy can take care of their families if something happens to them.
This content is brought to you by Anne Davis.
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