Insurance You Can Do Without – Life Insurance For Your Child | The ...

by Tom

I went to a trade show this past weekend for parents that are either expecting or recently had a newborn. More than one of the booths was pushing life insurance for your newborn. They were marketing it as cheap insurance that will help you save for your child’s future and protect their rates if they develop health problems later in life.

As with most of the posts in the Insurance You Can Do Without series, the biggest issue is that you have to look at what financial loss it is that you’re insuring against. In this case, you’re insurance against the death of a child. While this is an emotional decision, from a financial perspective what monetary loss will you suffer if something were to happen? There is the cost of the funeral, but otherwise your financial responsibilities would be reduced from not having to provide for that dependent. If the cost of the funeral is a concern, you would likely be better off by saving yourself the cost of premiums and adding that same amount into your emergency savings.

For the savings aspect of some of these universal life insurance products, you would be better off with term life insurance and saving the difference in premiums in a low-fee investment of your choice. That applies to anyone, not just children. However in this case, if you do decide that life insurance is unnecessary, you could save the entire equivalent amount of the premium within an RESP and accomplish much more in saving for your child’s future.

When it comes to protecting your child’s rates from future health issues, this would be a bit like gambling. To insure for this reason you would probably have some concern that your child will have problems in the future. The problem is, if you know of any family history then you have to tell the insurer and this will lead to higher premiums right from the start, and if you don’t tell them they could deny your claim.

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