The primary purpose of life insurance is to protect the dependent off financial burden in the event the insured person dies. Consequently, it makes less sense to take massive life insurance coverage on children, as no one depends on children financially. Therefore, buying a low premium life insurance coverage for babies can offer several advantages in certain situations, such as providing burial expenses if the worst scenario happens.
How Does Life Insurance Works?
The life insurance works by providing financial support to the named beneficially when the insured dies while the policy is still active. The insured is supposed to pay a certain fee premium, usually a monthly subscription to keep it active.
There are two types of life insurance; whole life insurance and term life insurance. Whole term insurance covers a person forever as long as the premiums are paid. Unlike whole term insurance, term life insurance policy offers its coverage with defined terms, such as 5, 20, 0r 40 years. In the occasion the insured outlives the conditions, the insurance coverage becomes absolute. However, some insurance providers allow the term life insured individuals to convert it to whole life insurance.
Because most of the term life insurance barely pays for death benefits, their premiums are usually cheaper compared to whole life insurance, which must pay unless the owner decides to them to elapse. For instance, a 40 years old female non-smoker in Florida can obtain a $150,000 term life policy covering ten years for about $15 monthly charges. A whole life policy with the same benefits would cost her $80 or even more every month.
The Relation Between Babies and Life Insurance
Life insurance vital when insured to a person who offers significant support to others, such as a spouse to children. If the breadwinners die, the people who depended on his/her support consequently face an income loss, and probably they are likely not to live a life they previously lived.
Because babies are not financially stable, no one depends on them. Even though losing a child is as tragic as losing a parent prematurely, the family in the former situation cannot experience financial burden by losing a child. Therefore, it is not really essential to buy your newborn expensive life insurance. Instead, this money can be saved for child education in later years.
When Does Life Insurance Make Sense for Your Newborn
There are a couple of strong arguments encouraging the need for buying your newborn at least a small life insurance policy. The first benefit is that it can provide financial support in case the absolute worst happens, and parents are forced to bury the child. As of 2015, the average cost of a burial ranged between $7,000 to $ 10,000. Many life insurance companies combine child life insurance to adult life policy for only a few dollars paid on a monthly basis, which can offer a significant financial boost in case a tragedy occurs.
Besides, life insurance for children is less expensive. Some parents decide to lock their children with life insurance so that when the children become adults, they can upgrade to inexpensive coverage also.