Do You Really Need Life Insurance for Your New Baby?

By Sara Lindberg Updated on May 8, 2019

You have the perfect crib, the safest car seat, the hippest stroller, and enough outfits to last for a year. But what about life insurance? Did you take out a policy for the newest addition to your family?

If you spend any time online or looking at parenting magazines, there’s a good chance you’ve seen the ads for child life insurance.

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Typically, life insurance is only needed by people (adults) who have others dependent on their income.

This includes you, as a parent, having life insurance that can be paid out to your spouse and children in the event of your death. So, why do you keep getting hit over the head with ads for life insurance for your baby? Is it really necessary?

Are newborn life insurance policies worth the money?

Like most things financial, it depends on who you ask.

Most financial experts will tell you there are better things to spend your money on. However, the companies selling these plans will try to tell you that a life insurance policy for your baby is just as important as the car seat you brought them home in.

But is it really?

Life insurance policies are generally purchased to help cover funeral and/or medical expenses for an adult. The funds are also used to pay off debts and supplement lost income. So, why purchase a policy for a baby?

What does life insurance for children cover?

Most companies offering this type of insurance will advise you to buy a policy when your child is young for the “just in case” clause. There are two types available: child term life insurance and child whole life insurance.

Term life insurance usually covers a certain period of time, such as 10, 20, or 30 years. It also only pays death benefits.

If you want more payout, you need to upgrade to a whole life insurance policy for your child. The benefits of this type of policy include:

  • Funeral and medical expenses. A life insurance policy for your child is often used to cover funeral costs, medical bills, and other end-of-life expenses. Some estimates put funeral costs around $7,000 to $10,000. Depending on the policy, it may also provide you with a bit of money if you need to take time off from work.
  • Acting as a savings plan for your child. And since a whole life insurance policy holds cash value, your child may be able to use that money when they are an adult.
  • Guaranteeing coverage regardless of a future medical condition. What this refers to is the possibility of illness developing late in childhood or adulthood that could prevent your child from being eligible for insurance.

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Can I get a child rider on my life insurance?

A rider is an extra policy feature that extends a small amount of life insurance to other family members, including children. But this comes at a cost.

Most term life insurance policies have a fee-based option to add a child rider. This allows you to expand your own life insurance policy so that it provides benefits to you in the event that your child passes away (for example, death benefits, or the amount of money paid out when a valid life insurance claim is filed).

Curious about the costs of having a baby? Check out How Much it Really Costs to Have a Baby to find out more. 

About the Author
Sara Lindberg

Sara Lindberg, B.S., M.Ed., is a freelance writer specializing in business, finance, health, and wellness. She holds a Bachelor's of Science degree in Exercise Science and a Master's Degree in Counseling. When she’s not writing, Sara can be found at the gym lifting weights, running the back roads to train for her next half-marathon, and spending time with her husband and two children. Read more by Sara Lindberg