There seems to be a lot of controversy over whether or not a family needs to purchase life insurance for a newborn or young child. Practically the minute your new baby is born you are bombarded with marketing literature and applications for life insurance stating that buying insurance is not only practical but a good way to ensure that your child is protected or that they will benefit later in life. Some of the marketing literature appeals to your emotions (which is perfect after seeing your new bundle of joy) while other literature uses guilt tactics by suggesting that your child will be deprived if you do not buy a policy.
Ultimately, the decision is up to you whether or not you think your child or your family as a whole will benefit from a life insurance policy for your child. The best thing to do is educate yourself on the overall process and reasons for why life insurance is a necessity for young families.
If you do decide to buy a life insurance policy for your newborn or child, term life insurance seems to be the best policy to purchase.
Why Term Life?
Term life insurance can be purchased for many different face values as well as for a number of different periods from 5 to 30 years. These policies are often convertible down the road and realistically, serve the best purpose for a baby or child. For more information on term life insurance visit http://www.equote.com/life-insurance/term-life-insurance.html.
To be sure, newborns and children are not the breadwinners for families. As coarse as it may sound, the reality is losing a child will not devastate a whole family in terms of financial ruin if, for instance, the entire income of the mother or father should disappear. The whole purpose of life insurance is to make sure that your family can maintain their current lifestyle or that your children will be able to attend college should you or your spouse become deceased. An insurance company would surely wonder if you took out a huge policy on a newborn or young child, so realistically, the benefits for someone so young would not support a family.
The problem with insurance companies suggesting that a family is depriving a child down the line if they do not purchase insurance causes a couple of problems. If parents do indeed decide to insure their newborn or young child they often neglect to buy enough insurance for themselves because they look at the overall budget for policies versus the payout. Second, while it appears that a life insurance policy will serve as a savings account should the child survive the policy by building cash value equal to or greater than the premiums paid, there really are better vehicles of savings than an insurance policy. Any financial advisor would choose a college 529 plan over an insurance policy.
The beauty of buying a term life insurance policy if you really must insure your newborn or young child, is you can buy a policy for as little as $5,000.00. These days that may not cover the whole amount of a funeral service, but it would help. Even if you increase the face value to $10,000.00 it would still be less expensive than going with a whole life policy or any other that build cash values. Further, if you choose a level term life policy the premium will remain unchanged for the life of the policy. Should you later decide to renew, chances are the child, who would most likely now be a teen or young adult, probably would not have to undergo a medical exam since they are still so young.
Term life insurance policies are the most cost effective way to cover any expenses you may incur should the unthinkable happen to your child.