Gerber Life Insurance is one of the most “sold” life insurance products – with the iconic Gerber Baby logo. Can you cash out a Gerber life insurance policy?
What is Gerber Life Insurance for children?
Gerber, yes, a company that produces baby food, is also involved in financial services. In particular, it offers a form of life insurance for children called the Growing Up Plan. If you’re a new parent, you’ve probably seen at least some ads for this insurance.
The Grow-Up® plan is a typical life insurance policy, which means it has the following features:
- You pay equal monthly fees as long as you have a life insurance policy.
- If the insured person (your child) dies, the insurance company pays the value of the policy (in the case of Gerber, the policy can be between 5,000 and 50,000 USD).
- Over time, the policy creates “cash value”. You can borrow on cash value, use interest on cash value to pay premiums, or opt out of the policy in exchange for cash value. We’ll discuss more on the cash value concept later.
The plan also has a small return. When the insured person turns 18, the policy amount doubles (for example, from USD 10,000 to USD 20,000). This makes it a little more valuable to the child. In addition, when a child turns 21, he or she automatically owns the policy.
When it makes no sense to buy life insurance for children
Many Gerber life insurance marketers surround part of the monetary value of the policy. The ad suggests that your child may be able to use the cash value to pay for college or serious expenses (such as weddings) in subsequent years. This alleged advertisement is real. Your child can take out loans based on the monetary value accumulated in the life insurance policy. The problem is that the value of cash in a life insurance policy increases very slowly over time. After paying the plan for 17 or 18 years, a $ 50,000 policy can have between $ 3,000 and $ 4,000 cash when the child reaches school-leaving age. If you want to give your child access to money between the ages of 17 and 25, a life insurance plan is rarely the way to do it. The value of cash increases too slowly to be profitable in your child’s life.
Is it worth buying Gerber life insurance for your child?
I suspect that most parents don’t have to buy all their life insurance for their child. From a financial planning perspective, I don’t see much need for a Gerber Life Insurance product. The only reason to consider this is that your child has a serious illness or disability, which may disqualify him from getting life insurance as an adult.
Although in most cases I don’t love the Gerber Life Insurance policy, I think a child’s life insurance can make sense in the right situation. I’ve always had my children’s insurance as part of my workplace plan. This is a very inexpensive benefit (when I buy at work) and it gives me peace of mind if I knew that I could quit my job if one of my children died.