Should You Buy Life Insurance For A Baby?

Should You Buy Life Insurance For A Baby?

I watch a lot of Adult Swim, which is the block of animated shows aimed at adults (Family Guy, Robot Chicken, etc) that airs every night on the Cartoon Network. Apparently a lot of new parents watch Adult Swim, too, because one ad that crops up consistently is the Gerber Baby Life Insurance ad.

This ad has always perplexed me. First of all, I question the assumption that Adult Swim viewers are breeding. Second of all, why should you buy life insurance for a baby?

The conventional wisdom regarding life insurance is that it covers the lost income for your survivors. In a typical family of four, you would want to buy life insurance for mom and dad. That way if mom dies, the money from her policy helps replace her lost salary, and preserve the family's financial security.

But most babies are not bringing in an income. I mean, one assumes.

Gerber pitches this policy as a sort of savings account, and a hedge against future uninsurability. Your baby can withdraw against the policy when he or she is heading to college! And since the Gerber policy can never be revoked, it lets your kid be covered by life insurance even if they turn out later to be uninsurable for some reason.

Unfortunately, both of these claims are bogus. And a little bit heartless, if you ask me. But I have to admire the cleverness of the ad exec who decided to target sleep-deprived new parents. That's probably genius.

First, this business of a whole life insurance policy acting as a savings account. This is a bad deal. It's one of the big selling points of whole life insurance (as opposed to term life insurance). Life insurance is a terrible savings plan. Even the life insurance companies will tell you (in the teeny tiny fine print) not to use their policies as a savings account. There are all kinds of hidden fees and charges, and you don't make as much in interest as you would off a normal account.

If you want to start a savings account, start a savings account. Start a college savings account for your baby, and put a little bit of money into it every month. It will grow pretty quickly! If you set up a 529 plan, it's tax-free if you use it for college.

Second, this bit about uninsurability. The truth is that there are very few ways in which a 20 year-old kid would not be able to get life insurance. Considering how rare it is, and how easily you can get coverage from specialty insurance companies, it's best to roll the dice on this one and assume that your child will grow up fine.

If you are still tempted by these sales pitches, first be sure that you and your partner (if applicable) have life insurance of your own! A surprising number of people will be lured into buying life insurance for their baby, when they do not have life insurance for themselves.

Insure your own life, first - that way your baby will be safe if something happens to you. And skip the baby life insurance, and put that money into a real savings plan for your baby instead.

Photo credit: Flickr/rchristie / Ryan