What Is the Best Life Insurance for a Baby?

Choosing the best company to purchase life insurance coverage from on the life of a child has much more to do with the cost of the policy.  A life insurance policy purchased on a babies’ life will likely be an asset for the child well into their adulthood, and the intent is for the policy to be there providing protection for the entire lifetime of the child, even after they have a family of their own.  Choosing a company that is trustworthy, provides good client service, has a strong historical dividend payout record, and one that has a strong track record of financial stability is much more important in the ultimate value of the policy, both for the parents and the child.

When Can Coverage Be Purchased

Life insurance coverage can be purchased for babies, usually within one day to 14 days, up to six months of the child being born depending upon the company offering the coverage.  The minimum life insurance that can be purchased on a babies’ life can oftentimes be smaller than the minimum amount that must be purchased on an adult’s life.  Coverage on the life of a baby usually starts at a death benefit of about $5,000 to $50,000, but the amount can be much larger if desired by the purchasing parents.   Some programs double the death benefit of the policy when the child reaches 18 years of age. Usually, it does have a lower maximum benefit cap than a policy that an adult can have on their life. Life insurance can also be purchased for older children as a traditional policy (not a baby life insurance plan).

Only a parent, legal guardian, or grandparent can purchase life insurance on the life of a baby through most programs, such as Gerber. Some programs automatically transfer ownership of the policy to the child at age 18 or 21, while others do not.

Only Whole Life Insurance Can Be Bought

Life insurance coverage for a baby is exclusively whole life insurance.  Term life insurance is not offered for babies and young children because there would be little justification for parents to purchase a life insurance policy that will expire at such a young age.  For the vast majority of children, a term policy would not pay a benefit when it is in force.

Whole life coverage on a babies’ life is also extremely inexpensive, so there is a minimal incentive for a company to sell a life insurance policy that has administrative costs far more substantial than the actuarial insurance costs.

Which Companies Offer The Best Baby Life Insurance

The best life insurance coverage purchased for the life of a baby is offered through all major life insurance carriers.  New York Life, Prudential, MetLife, and Northwestern Mutual all offer life insurance for babies.  These carriers are all leaders in the industry and have the track record and reputation to offer a top-notch policy that will be useful to you and your child for as long as you both live.

The most important factor to consider is the future longevity of the company.  All of these companies have solid financial records, which means that the life insurance coverage will always be in place, even as your child grows and reaches old age.

History has typically shown that mutual life insurance providers pay the largest dividends over time.  Northwestern Mutual and New York Life are both mutual life insurance companies.

To get a quote from each of these companies, use our Life Insurance Quote Tool.  You can compare prices from each of these companies to help you decide which provider will be the best for you and your child.

Gerber Is Most Expensive

A company that markets life insurance coverage for babies aggressively is Gerber, with their Gerber Baby Insurance.  While Gerber is a very trusted name in food and nutrition for children, they do take the opportunity provided by that trust to charge higher premiums for their children’s life insurance products than the rest of the market charges.

We at Life Ant always advice that people consider all options, and compare prices from every company because there is a lot of variation in pricing, which is highly dependent upon the circumstances of each individual.  It is our experience, however, that Gerber life insurance does charge more money for the same value provided by other companies.  Please consider all options before reaching your purchasing decision.

Why Purchase Baby Life Insurance

Life insurance is purchased on the life of a baby for several reasons.  First and foremost, by purchasing a life insurance policy on a baby the parent is guaranteeing the child that they will have life insurance coverage for their entire life, no matter what their health condition becomes.  Even though baby life insurance policies are usually smaller than policies for adults, there are often riders attached to the policy, which allows for additional insurance coverage to be purchased at various points throughout the life of the baby.  This concept is known as providing a guaranty of insurability.

Life insurance on the life of a baby also protects the parents.  If something happens to a young child, a significant financial investment has typically already been made by parents.  If a child dies, it can provide the parents the financial stability to raise other children. this includes the cost of a funeral. A burial plot and funeral for a child can cost upwards of $20,000! Baby life insurance can protect parents from the financial risk of this unfortunate event happening.

Another benefit to the child is the cash savings value of the policy.  The policy will have a growing surrender value, and loans may be taken against this value during a child’s lifetime.  Sometimes this value will be used to fund education, or it may be used to put a down payment on a house.  It can also pay for a wedding, or provide an emergency source of funds to smooth out rocky financial times during the child’s life. While the primary goal of baby life insurance is usually financial protection from death, a close second goal is a financial headstart that the policy can provide. By the time the child is 18, dividends may very well pay for the entire premium payment, and a considerable amount of cash value should be saved in the policy. This money can be used for any purpose! One day it may even help fund the purchase of a house.

If no additional life insurance is purchased, a baby’s life insurance policy will typically pay enough in dividends to cover the entire cost of the insurance by the time the child reaches adulthood or to pay out a nice little additional income. This will continue to grow over time.  If the parent’s goal is the gift the policy to the child eventually, the policy will only be a financial benefit to the child.

For a more in-depth look at the reasons why people purchase life insurance on the life of a baby, please see our children’s life insurance article.

Reasons Not To Purchase Baby Life Insurance

Baby life insurance is an added expense for a family.  The reality is that many policies can be purchased for less than $9 per month, so any expenses are minimal.  For families without a few extra dollars to spend a month, life insurance may not be an additional bill they are able to pay.  Most families can easily afford a life insurance policy on the life of a baby or child.

If the policy is used purely as a source of savings, a higher rate of return can usually be attained through the use of an investment account, though with the volatile market this is not guaranteed the same way cash value growth is for a life insurance policy.  For a look at the growth of a life insurance policy’s cash value vs. the growth in an investment account, see our article on buying term and investing the difference.  The value of a life insurance policy is that it will grow at a guaranteed rate of return, no matter what happens in the stock market.

Another argument is that young adults do not usually have any problem purchasing life insurance, so parents are not worried about guaranteeing the insurability of a child.  While this is mostly true, the purpose of life insurance is to protect against uncertainty in an uncertain world.  This is a choice that must be made for each individual family. All insurance is meant to protect against the risk of a worst-case scenario. Most children in developed countries are at very low risk of dying. Each parent, legal guardian, and parent needs to decide if they want to pay for protection, and if the financial benefits over time are worth the cost.

How to Buy Baby Life Insurance

You can purchase life insurance on the life of a child or baby by starting with our quote comparison tool.  Simply enter your zip code and compare rates from various companies.  You can purchase a policy or learn more information after you compare quotes from different providers.