Does it Make Sense to Get a Newborn Life Insurance?
Newborn life insurance is a product that is marketed by a number of companies to parents of young children. However, there are a number of reasons that buying life insurance for a newborn is not a wise financial decision.
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Low Return on Investment
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Newborn life insurance is quite inexpensive; however, considering the time that the money has to grow, the insurance does not provide for a high rate of return. Many newborn life insurance policies are for small amounts --such as $5,000 or $10,000 -- that will be a small sum of insurance for an adult.
Financial Cost of Death
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While the death of a young child is a traumatic event, in most cases there is only minimal financial impact. The cost of a funeral and possible medical bills would be the only debts left behind. While adults have life insurance to provide for their family financially due to loss of income, this is not the case with children.
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Alternatives
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Parents considering purchasing newborn life insurance should make certain that they are properly insured. The death of a parent is a far more detrimental financial event to a family than the death of a child. Other investments to consider include opening a 529 plan for college savings, a prepaid college fund, savings bonds, and mutual fund investments.
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References
- Photo Credit baby image by Dron from Fotolia.com
