05 Jul How does life insurance company know I had a baby?

Q. We had a new baby two months ago, and I keep getting offers in the mail for life insurance for us and for our baby. How do these companies know we had a baby, and how can we decide if the policies are good ones?
— New dad

A. Big brother really is watching.

Before your baby was born, you probably did some research for the baby.

Each trimester offers an opportunity for insurance marketers to target new parents who are online looking for information or shopping for the baby, said Betty Thomas, a chartered financial consultant and certified financial planner with Lassus Wherley, a subsidiary of Peapack-Gladstone Bank, in New Providence.

“Needless to say, if you searched for anything online, the websites could have been tracked and any information gathered became an opportunity for insurance marketers to find you,” Thomas said. “If you bought baby items online, such as newborn supplies, the information provided on websites is a wealth of information to insurance marketers because it helps them estimate when the baby might be born or if a parent recently gave birth.”

She said deciding if the policies are good policies would depend on the life insurance company.

Insurance companies are rated by agencies such as Moody’s, Standard & Poor’s or A.M. Best.

“Usually ratings can go from ‘AAA’ being exceptional to ‘D’ which could indicate a default risk,” she said. “Therefore researching an insurance company is important, making sure it is creditworthy, with the ability to pay its claims and it is a financially strong company.”

But do you really need life insurance for a baby?

Thomas said in most cases, buying life insurance for a child is not recommended.

That’s because a function of life insurance is to replace income or cover final expenses. Children do not have an income to replace, therefore there would not be a need for life insurance, she said.

“Also, insurance policies written for children are usually whole life policies and can be expensive,” she said. “The dollars that would be used to pay the premiums for a policy could be used to fund an education savings program for the child such as a 529 plan.”

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This story was originally published July 5, 2019.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.