The Gerber Grow-Up Plan is a very unique life insurance option that parents can buy for their kids when they are newborns. It has been around for decades, and even if you don’t know much about life insurance, you probably have already heard of this plan. If you are currently expecting or just had a baby, you may be wondering if this plan is a good option for them. Here’s what you need to know about the Gerber Grow-Up Plan for your newborn.
What is the Gerber Grow-Up Plan?
The Gerber Grow-Up Plan is a whole life insurance policy specifically for children. As the name implies, the policy will cover your child for their entire lifetime. Although it’s very unlikely that your child will pass away anytime soon, it’s comforting to know that there is a financial safety net in place should something happen. Coverage is available from $5,000 to $50,000, and parents or grandparents can apply for it. The policy must be purchased when the child is between two weeks and 14 years old. When the child turns 18, the coverage amount doubles. When they turn 21, they will become the policyholder. Since the Gerber Grow-Up Plan is a whole life insurance policy, it offers the option to build cash value. Some people like to use this to save money for college or other future prospects for the child.
What are the advantages of the Gerber Grow-Up Plan?
There are a few positive aspects of this plan that are worth considering. The first is that it is very inexpensive. Because children are generally very healthy and unlikely to pass away, Gerber is able to offer incredibly cheap insurance rates to policyholders for this plan. The rate will stay the same for the entire length of the policy, so your child will have access to these low insurance rates later in life. The other benefit this plan offers is a peace of mind for parents, grandparents, and caregivers. You can feel comfortable knowing that your child is covered in case the unthinkable happens.
It also starts your child’s financial journey off on a good note. The Grow-up plan, like all whole life insurance, has a cash value. This means that the policy is actually a source of savings for your child, and they can use the cash value for anything they want. It can help pay for a college education, or go as a down payment for a house.
The beneficiary also does not have to remain the parents. If the child grows up and has a family, this life insurance policy can be used to provide them support if it becomes necessary. It also locks in life insurance coverage. Even if the child has cancer or other illness that may disqualify them from obtaining life insurance, this policy will remain in-force. This is called retaining insurability.
What are the disadvantages of the Gerber Grow-Up Plan?
While the Gerber Grow-Up Plan sounds like a great idea at first, it’s important to really think about the logistics of this plan. The biggest disadvantage is that the death benefit is simply not large enough for most adults. The maximum death benefit you can get with the Gerber Grow-Up Plan is $100,000, and although this will cover funeral expenses, it won’t pay down existing debts or replace your income for your family. Many people argue that children don’t need life insurance, so you are essentially spending money when you don’t have to, even if it is a relatively affordable amount. Even if your child were to pass away unexpectedly at a young age, you would not be financially devastated, as they don’t have an income or debts to deal with.
The Gerber Grow-Up Plan is also marketed as a way to save money for your child since there is a cash value component. However, it’s important to tread carefully when it comes to using cash value life insurance policies as a savings tool. When you make your payments on the Gerber Grow-Up Plan, a portion of it goes into an account where it grows with interest, and you can opt to withdraw it later and forgo the death benefit. However, the interest rates and dividends on these accounts aren’t the best on the market. You will likely be able to save more money for your child’s education by using a 529 plan, which is a tax-free investment account specifically designed for college savings. It’s very important to compare the rates of several different options before making your final decision. College can be expensive, so it’s better to be cautious early on to make sure you are prepared when the time comes.
If you do decide to use the Gerber Grow-Up Plan, the best option is to take out just enough money to cover funeral costs. That way, the child will be guaranteed that money for their entire life at a low rate, and they can take out more coverage to cover debts and income loss later in life. However, you may want to consider just waiting and talking to your child about life insurance options when they become an adult. Yes, the premiums will be higher, but they will get a policy that provides more value to them. Also, keep in mind that other life insurance companies offer baby insurance. You do not need to go to Gerber in order to insure your child. Many times, you can get more coverage for less money by comparing options from different providers. You can easily get quotes from this website, or an agent.
Although the Gerber Grow-Up Plan can seem tempting, it may not make the most sense as a savings vehicle for your child. If you’re struggling to find the right financial tools as a new parent, consider talking to a financial advisor for guidance.