Babies may be small, but they come with a long list of necessities: diapers, car seats, strollers, swaddles and a surprisingly large wardrobe of tiny clothing.
For generations, new parents leaned on the goodwill of friends and family to offset the cost of purchasing baby-related gear and accessories through their baby registry. And with the rise of cash funds (which make requesting money over gifts more culturally acceptable and much less socially awkward), millennial couples can now ask for services that are important to them, whether that’s signing up for a fancy cloth diaper service or setting up a 529 college plan for Peanut.
While cash funds are nothing new, the latest one being rolled out by Babylist is a first. The baby registry platform, considered the leading one in the U.S., has partnered with Prudential to offer new parents the option to add a life insurance policy to their baby registry in addition to traditional registry items.
Why life insurance is important for new parents
There’s nothing like a new baby to prompt expectant parents to start thinking about building a financial safety net for their family. But in a June 2018 survey of nearly 5,000 expectant parents, Babylist found that while 97% of respondents believe life insurance is important, only 61% planned to purchase a policy over the next year. Worse, a 2016 study by LIMRA, a global research company that provides insurance insights, revealed that only 18% of millennials actually own some form of individual life insurance.
"The Prudential partnership allows new parents to channel their intention to buy insurance into a set of concrete steps, from establishing how much insurance they need to asking friends and family to help fund it," said Natalie Gordon, CEO of Babylist. "We have heard anecdotally that new grandparents are likely to make a gift of life insurance, and we're the first to make it this easy to give."
How life insurance cash funding works
An expectant parent setting up a baby registry through Babylist can add a Prudential term life insurance goal in the Cash Funds section, then select a target amount which friends and family can contribute toward. Some parents might choose a goal that would cover just the first year's insurance premiums; others might set a goal high enough to cover two or more years of coverage. Regardless of the goal amount, any monetary contributions are transferred to their bank account, minus a small processing fee.
Setting up that fund doesn't secure their policy, though. Parents will then need to go to Prudential to select their desired amount of coverage and purchase a plan.
You can jump-start this process by getting a quote for your policy ahead of time. This gives you an idea of how much your policy will cost before setting your goal and get you that much closer to officially obtaining coverage.
Does it make sense for you?
While no parent puts a monetary value on what it means to have a child, adding up the total costs to raise a child to the age of 17 can cause real sticker shock. As of 2015, the USDA estimated it’s an average of $233,610. Factor in the cost of housing, food, childcare, medical bills and entertainment, and it's easy to see how the costs add up.
To get an idea of how much insurance you need should you or your partner pass away, tally the cost of your burial (about $10,000), your outstanding debts, three to five years' worth of income and, if you want, the estimated cost of your child's education expenses. The resulting number is a good place to start when shopping for term life insurance. You can then increase or reduce this coverage over the years as you pay off debts and your needs change.