A close friend of Amy Shanabarger, the boy's mother, told the Louisville Courier-Journal the policy was valued at $100,000.
Police acknowledged Friday the insurance policy is part of their investigation into the bizarre murder-for-revenge case Ronald L. Shanabarger, 30, confessed to on June 23.
Franklin Police Chief Harry Furrer said police still feel that revenge on his 29-year-old wife was Shanabarger's primary motive for allegedly suffocating their seven-month-old son, Tyler R. Shanabarger.
Amy Shanabarger declined to comment. But close friend Wendy Heim said the boy's mother told her and family members about the insurance policy and her husband's plans for the money.
In an interview with the Courier-Journal, Heim said Amy Shanabarger said her husband wanted to spend the insurance money and asked her if they could continue their marriage without the boy.
"He told (Amy) he already had $50,000 of it spent in his head," Heim told the Courier-Journal. Heim said the policy was valued at $100,000, but that she didn't know when Shanabarger had purchased it.
"We feel we have covered all the bases. We are fully aware of that, and we know the specifics around it," Furrer said.
"You can look at the other circumstances surrounding this situation and possibly connect the whole thing together with the crime," Furrer said. "A lot of that has been done by the detectives. They did a lot of interviews, and they have a lot of information that they say gives us a very good case."
Shanabarger told police he planned the crime to exact punishment on his wife, who had refused to cut short a cruise vacation with her parents after his father died in October 1996.
On June 22, just hours after Tyler's funeral, Shanabarger confessed to his wife he smothered their son in his crib three nights earlier, investigators said. A coroner had ruled the infant died from Sudden Infant Death Syndrome.
Rather than immediately call police, Amy spent the night in their home with him, then drove with him to the jail the next morning, according to documents and interviews with investigators.
Heim said Amy accompanied her husband of two years to the Johnson County Sheriff's Department, where he confessed to the crime, because he wouldn't go on his own.
The Courier-Journal also reported Saturday hat Shanabarger refused to accompany his wife to the hospital when she gave birth to Tyler last November and repeatedly complained she spent too much on toys.