Should you insure your baby against alien abductions?

Every day, millions of newly minted American parents go home from the hospital with a baby in one arm and a bundle of product samples and coupons in the other.  Included in the marketing onslaught is a mysterious advertisement from Gerber Life Insurance.  Confused, you ask your spouse, "What exactly is that and do I need it?".  Gerber's website says: "Give your children the protection they deserve".  Well, who wouldn't want to do that?  But what exactly are you protecting  them from?  Diaper rash?  Death?  How can an insurance policy protect your child from dying?  

Let's back up for a second and review some basics.  Why would anyone ever need life insurance?  Because someone else is depending on you making money and would be in a big fat mess if you died, that's why.  There are really two ways to look at how much life insurance, if any, a person should have.  One way is "income replacement", which means that you add up all the money you would have made in your lifetime, if only you'd lived longer, and based on that decide on the size of the check that will comfort your grieving family if you should die sooner than expected.  The other way to look at it is a "needs assessment", and that's when you add up all the financial obligations your family will be stuck with if you died  --- the cost of burying you, paying your mortgage, hiring someone to help around the house, funding Ivy League educations for your extremely gifted children, a cushy retirement for your spouse, etc., and you figure out what that's all going to cost to determine the death benefit of the policy you need.

So Gerber, that name you know and trust, is selling life insurance.  For babies.  That means that if your child dies, you collect money.  And HOW would you determine how much life insurance your baby requires?  Do you use the income replacement method, or the need assessment?  How much money will your baby earn in his lifetime?  More importantly, WHY would you want to buy life insurance for a baby?  Unless you were having babies for the purpose of immediately finding them acting gigs, and you planned to live off that income (hey, this is Hollywood), or maybe you were planning on sending them off to work in salt mines (do we still have those?), replacing your baby's income may not top your list of priorities.  I'm also pretty sure that most parents basking in the glow of their new baby are not immediately preoccupied with thoughts of how to pay for that baby's funeral.  No, most parents are more concerned with how to pay for college, and Gerber has a solution for that too: the Gerber College Plan.  Not a college savings plan, because it's not a savings plan at all, but rather an "endowment".  The website says that for $6 a day, your child can have $30,000 by the time they're ready to go to college.  OK, so $6 a day, times 365 days, is $2,190 a year, and 18 years later, you will have put in $39,420.  To get a $30,000 benefit.  

Really?  

Let's see, put that same $2,190 annual contribution in a 529 college savings plan and earn a conservative 7% a year, and in 18 years you'll have over $74k.  And let's not forget that withdrawals from a 529 account for college expenses are not taxed, unlike distributions from an endowment.  

It turns out that there are 2.9 million active Gerber policies out there. Go figure.  I don't think buying baby life insurance is such a good idea, but there are a few other interesting insurance policies you might want to consider purchasing:

In case you are planning to marry your baby daddy/mama, you can buy a wedding insurance policy from Fireman's Fund, which covers illness, serious injury or death of a key participant, as well as liability and cancellation coverage.  Running between about $100 and $500, it's a bargain.  You can also get a policy that covers either the bride or groom getting cold feet, and for an additional fee, you can add coverage for gifts, photos and wedding attire.  I see nothing about coverage for getting drunk and making a fool of yourself.  Sorry.

You might also be interested in Alien Abduction Insurance.  Apparently, these policies are redeemed if the insured person is abducted by aliens, but the burden of proof lies with the claimant.  I don't know how you'd prove you were abducted, because presumably, you'd be gone. However, one of the companies offering this type of insurance says that it has paid out at least two claims since they began offering the policy 25 years ago.  Anyway, it costs around $150 per $1.5 million in coverage, which in comparison to the Gerber thing is also a bargain.  Policies for alien pregnancy, alien examinations and death caused by aliens, are also available. Recently, the Alien Abduction Insurance Corporation has launched the idea of Abduction Insurance Certificates as a unique gift for a lifetime premium and sell it at $9.95.  Over 20,000 people have purchased the insurance.

But perhaps my favorite is the Immaculate Conception Insurance.  These policies pay out in the event that god impregnates the insured.  While this seems like it might be hard to prove, that hasn't stopped the 4500 people who have bought these policies.

So look, even if god is your baby's father, but he gets cold feet at the altar (or refuses to be photographed), and you get abducted by aliens, you're only out a few hundred bucks in premiums, and all those policies are going to payout enough money to fund a nice 529 plan, a ROTH IRA, and maybe a nice swing set  (Preferably away from open cornfields).   See?  You can give your child the protection he deserves, but instead of Gerber's baby life insurance, which doesn't actually protect him from anything except positive investment returns, buy him an alien abduction policy, and give yourself a truly priceless gift  ----  the peace of mind that comes from knowing that if your child is ever abducted by aliens and he can prove it, he will be rich.  And isn't that really the American dream?