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Life Insurance on Children? No Way!

We recently ordered the pictures taken at the hospital for our newborn. While ordering I was thrown a sales pitch on buying life insurance for my child. Last time I checked life insurance was to replace lost income. My children, while I love them dearly, are not really contributing to the bottom line of our family books.Let’s take a look at some of the myths people use to justify buying life insurance on children.

Myth: You will need it to pay for burial expenses.

Burial expenses are a one time cost. While the cost is high, it is still less than a year of our child care expenses, and significantly less than what we will spend over a lifetime raising our children.

Myth: It’s cheaper to buy now than later.

Buying something that I don’t need when it is cheaper does not make it a good deal. It’s the same as buying olives on sale. I still won’t eat them.

Myth: It’s a good way to save for children.

If they mean disciplined, maybe. But I assume that good means getting a reasonable return on the investment. While whole life policies do include a cash value portion, it would be much better to discipline yourself and invest the money elsewhere, in a high yield savings account [1] for example.

Myth: In case they become uninsurable later.

Isn’t this a double negative? Insuring against becoming uninsurable. This argument probably holds the most weight, but again, unless they are contributing to our family dollars, there is no income to replace currently. When they do get a job and need to be able to replace their lost income, there are still other avenues available such as group coverage through an employer. For adults, see How Much Life Insurance Do You Need? [2] 

Final words
Of course there are always exceptions to the rule. For example, if your family does not have an emergency fund, and a burial would put you into debt, it may be worth considering. However, for the majority of families I find it as an unnecessary expense. Taking the money spent and investing it in their education [3] is a better route to go.