Nesting: Don't Buy Life Insurance for Your Baby

(MoneyWatch)  There's nothing I respect less than companies that market useless products to expectant moms and dads. Especially ones that do so by preying upon a parent-to-be's fears. My personal pet peeve is the pitch for baby life insurance.

I recently came across an advertisement for this product inside my husband's life insurance application. The insert said the best time to buy a policy for my child is when she is young and in good health. Should my little one become seriously ill, the company argues she will likely become very expensive to insure or even uninsurable.

What do I take away from all this? Although my baby isn't even born yet, the insurer wants me to start worrying that her life is in danger and that she could even die.

Don't get me wrong, I understand that life insurance is a necessary product. And if there's ever a day that might motivate parents to call a sales agent and purchase a policy, it's today, September 11^th. After all, sometimes the unthinkable does happen and we all should be prepared. But let's get one thing straight, life insurance is meant to replace income if you have loved ones who depend upon your paycheck to get by.

Sometimes, the wealthy will also purchase a whole life insurance policy for estate planning and tax purposes.

Parents, however, don't depend upon a child's income to support the family. So I just can't understand why a mother or father would need a policy for their little one.

The traditional reason parents are told they should consider a policy is that the proceeds will come in handy to help pay a child's burial costs. The thinking is that god forbid something happens to your baby, at least you'll have the insurance proceeds to buy a casket.

I noticed the insert I received didn't mention burial costs. Perhaps the company realized it was crossing some kind of ethical line and stopped that particular pitch. Instead, it kept emphasizing price. A $30,000 policy costs just $9.50 a month for a child up to age seven. And since it's selling a whole life product, once that child becomes an adult he can use the proceeds, or it's cash value, for future needs.

Just because a product seems cheap that doesn't automatically make it a smart investment. If you want to give your child some type of cash gift when he grows up, you're better off investing your money in a no-fee mutual fund or a tax advantaged college savings plan.

But if all this talk about life insurance has you thinking your family needs some coverage, assess your needs and consider buying term life insurance for you or your partner.

Baby Rabah image by Badrnaseem, CC 2.0.