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Baby Life Insurance: Do Newborns Need a Policy?

Last updated 03/18/2024 by

Ben Luthi
Having a baby is one of those milestones in life where parents should start considering life insurance. But do you need life insurance for your baby?
Many experts would tell you that it’s not necessary. But getting life insurance is sometimes more about giving your family choices than it is a simple financial transaction.
Here are three reasons why you might want to consider it.

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Funeral expenses and other costs

Losing a child is tragic enough. Parents who have to go through this tragedy don’t need a financial burden making it even worse. However, if you are ever faced with the situation, you’ll need to pay for funeral arrangements.
A funeral costs between $7,000 and $10,000 on average, according to Unless you have a substantial emergency fund, it can be hard for many families to find the money. A small life insurance policy can help you avoid going into debt while you’re grieving.
Additionally, there may be other final expenses that you have to deal with, such as counseling and medical expenses. Consider getting a little more coverage than is necessary for the funeral so that you can be prepared for those costs too.

You might want some time off

The death of a child may not be financially devastating, but it is emotionally devastating, and it can take time to heal. Some employers offer bereavement benefits, but not all do. Even if yours does, it might not provide you and your family with enough time to start the healing process.
“When my children were born, I actually bought a $100,000 term policy on each of them,” says Chris Huntley, president of Huntley Wealth and Insurance Services.
“My reasoning was that, if anything happened to them and my wife and I needed to take some time off work to grieve and heal, we could do so without worrying about finances.”
So, if you can afford it, consider paying a little extra to get insurance to cover more than the final expenses. Above all, this can give you the choice to take extra time off if you need it.

It’s an inexpensive way to guarantee your child qualifies for life insurance coverage

If you purchase life insurance coverage now, it will guarantee your child will have some coverage as an adult, regardless of what health issues he may have later on.
There are a couple of options you can choose from when getting life insurance for your newborn. The most inexpensive option is to get a child rider policy, which many insurance companies allow you to add to your term life insurance policy.
Typically costing $5 to $7 per $1,000 in coverage per year, a $10,000 policy would cost as little as $50 a year, or just a bit more than $4 a month.
The other option is to buy a whole life insurance policy. These aren’t too much more expensive than a child rider policy. For example, I purchased $50,000 worth of coverage on each of my children for around $30 per month or $7.20 per thousand dollars in coverage.
But with a whole life insurance policy, there’s a cash value account that grows as your child does. When she’s old enough to get insurance for herself, you can surrender the policy and take the cash value. Or, you can give it to her to help pay for college.
Of course, whole life insurance isn’t the best way to save for the future. The cash value earns 2.6% per year on average, according to Dave Ramsey. But if you want the coverage for your child and a child rider isn’t available, a whole life policy is a good alternative.

Make sure you’re covered first

“It is exceedingly more important to insure yourself first before you worry about insuring your children,” says Huntley.
Not having that coverage can be both emotionally and financially devastating for your family if you or your partner dies prematurely. This is especially the case if you’re the breadwinner of the family, as losing your income can have long-term consequences.
As you’re comparing life insurance companies, check to make sure their term life insurance policies have child riders that you can opt into.
Then, seriously consider whether getting a policy for your newborn is worth it. Think about all of the immediate expenses that would come with a premature death, and also consider if you’d want some extra time to grieve without worrying about money.

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Ben Luthi

Ben Luthi is a personal finance writer and a credit cards expert who loves helping consumers and business owners make better financial decisions. His work has been featured in Time, MarketWatch, Yahoo! Finance, U.S. News & World Report, CNBC, Success Magazine, USA Today, The Huffington Post and many more.

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