It might seem taboo to talk about a life insurance policy, particularly for children, but whole life policies are different. While whole life insurance policies are more expensive than term life policies, they are guaranteed to retain their value your entire life (assuming you keep paying the premium). They also act as a sort of savings account, holding a “cash value” that can be borrowed against or cashed out eventually.
What is the Gerber Grow-Up Plan?
The Gerber Grow-Up plan is exactly that, but for your children. You can select anywhere from a $5,000 – $50,000 plan, each with its own premiums, and once you’ve selected an amount, the rate is locked in, unless you later choose to add more coverage. It’s one of the oldest such plans in the United States and has been a solid investment for decades. Let’s look at some of the finer points of the plan and why it might be sound investment choice for you and your children.
How does whole life differ from term life?
Without getting too into the weeds here, there are two primary differences:
– Whole life is more expensive but covers you over the course of your life, regardless of what happens (unless you stop paying). Term life is exactly that – set within a term limit. You will pay less, particularly if you’re younger and in better health, but there will be a point where the coverage ends and you will need to get new coverage.
– Whole life adds a cash value, which increases the value of the plan and you can cash it out, like a savings account. Additionally, these plans are more expensive – often 5x or more per month pricier – but their flexibility is worth the investment in most cases.
What is the Gerber Grow-up Plan?
Essentially, the Grow-up Plan is a whole life insurance policy that can be purchased by a parent, grandparent or legal guardian of a child aged 14 days to 14 years old. The minimum coverage is $5,000, up to $50,000 and the premium adjust accordingly. For instance, a $10,000 plan is only $1.50 per week, or $6/month in most cases, which is incredibly affordable.
The cash value accumulates yearly as your child ages and once they’re 18, the value of the coverage doubles without an increase in the premium. At 21, your child can take a loan against the cash value they can pay back, keep it as a whole life insurance policy while paying the premiums, or simply cash it out. The flexibility here versus the meager investment is astounding and absolutely worth putting your money into.
Additionally, at 21 the child has the option to get more coverage, up to 10x the original amount for an increase in premiums. So a $50,000 policy under this selection would balloon up to $500,000 in whole life insurance coverage.
Is the Gerber Grow-up Plan worth it?
The Gerber Grow-up Plan is absolutely worth the investment. With a roughly 8% loan interest rate, you will be hard-pressed to find a similar investment for the price, and since you can get it at such an early age, it allows the whole life policy to accumulate constant cash value for much longer periods than a policy picked up as an adult.
Nobody wants to think about needing life insurance, but it does provide peace of mind that your loved ones will be covered in the event of a tragedy. This particular plan, however, can mean so much more than the worst case scenario; it can provide a college fund, a down-payment on a house or the start to a business when your child or grandchild turns 21. Sure they can keep it as an incredible whole life insurance policy for the long-term, but this small investment can become a huge nest egg when they’re 21.
Do you have a child who has this policy? Or did you yourself have a Gerber Grow-Up Plan that you utilized? How was your experience? We’d love to hear in the comments below how the Gerber Grow-Up Plan has worked for you and your family!